<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 24, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRICE COMMUNICATIONS WIRELESS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 13-3956941
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
----------------
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 757-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT PRICE
PRICE COMMUNICATIONS WIRELESS, INC.
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 757-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
RICHARD D. TRUESDELL, JR.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
11 3/4% Senior
Subordinated Exchange
Notes due 2007........ $175,000,000 100.000% $175,000,000 $53,030.30
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 24, 1997
PROSPECTUS
, 1997
$175,000,000
OFFER TO EXCHANGE
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PRICE COMMUNICATIONS WIRELESS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
Price Communications Wireless, Inc. (the "Company" or "PCW"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange $1,000 principal amount of 11 3/4% Senior
Subordinated Exchange Notes due 2007 (the "New Notes") of the Company for each
$1,000 principal amount of the issued and outstanding 11 3/4% Senior
Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes,
the "Notes") of the Company. As of the date of this Prospectus there were
outstanding $175,000,000 principal amount of Old Notes. The terms of the New
Notes are identical in all material respects to the Old Notes, except that the
offer of the New Notes will have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and therefore, the New Notes will not
be subject to certain transfer restrictions, registration rights and related
liquidated damage provisions applicable to the Old Notes.
The New Notes will bear interest from July 10, 1997. Holders of Old Notes
(each person in whose name a Note is registered, a "Holder") whose Old Notes
are accepted for exchange will be deemed to have waived the right to receive
any payment in respect of interest on the Old Notes accrued from July 10, 1997
to the date of the issuance of the New Notes. Interest on the New Notes is
payable semi-annually on January 15 and July 15 of each year, commencing
January 15, 1998, accruing from July 10, 1997 at a rate of 11 3/4% per annum.
The Notes will be redeemable, in whole or in part, at the option of the
Company, at any time on or after July 15, 2002 at the redemption prices set
forth herein plus accrued and unpaid interest, if any, to the date of
redemption. See "Description of Notes."
The Notes are subject to a special mandatory redemption on at least five
business days' notice given at any time on or prior to December 31, 1997 (the
"Special Redemption Date") with monies held by the Trustee, at 101% of the
principal amount thereof, plus accrued interest to the date of redemption, if
the acquisition by the Company of Palmer Wireless, Inc. ("Palmer") is not
consummated on or before December 31, 1997 or if it appears, in the sole
judgment of the Company, that the acquisition of Palmer will not be
consummated by December 31, 1997. Although the acquisition is expected to
occur in October 1997, the acquisition remains subject to certain conditions,
including FCC approval, and there can be no assurance that it will be
consummated. See "The Acquisition." The proceeds from the sale of the Old
Notes, together with approximately $18.0 million in cash (sufficient to pay
principal, premium and interest accrued through December 31, 1997), are being
held by and pledged to the Trustee and invested in certain Eligible
Investments (as defined herein) until the earlier to occur of the special
redemption or the acquisition, and the obligation of the Company to repay the
Notes resulting from a special redemption is secured by such Eligible
Investments. See "Description of Notes--Special Redemption."
The Notes are general, unsecured obligations of the Company and are
subordinated in right of payment to all Senior Indebtedness (as defined
herein) of the Company, including indebtedness under the New Credit Facility
(as defined herein). The Notes rank pari passu with any future senior
subordinated indebtedness of the Company and rank senior to all subordinated
indebtedness of the Company. As of June 30, 1997, on a pro forma basis after
giving effect to the issuance and sale of the Old Notes ("the Offering") and
the financing of the Acquisition (as defined herein), the Company would have
had $426.0 million of outstanding Senior Indebtedness.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Rights Agreement, dated July
10, 1997, among the Company and the other signatories thereto (the
"Registration Rights Agreement"). Based upon interpretations contained in
letters issued to third parties by the staff of the Securities and Exchange
Commissions (the "SEC"), the Company believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by each Holder thereof (other than a
broker-dealer, as set forth below, and any such Holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holder's business and such Holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Eligible Holders wishing to accept the Exchange Offer must represent to
the Company in the Letter of Transmittal that such conditions have been met.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange of Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. In the event the Company terminates the Exchange Offer
and does not accept for exchange any Old Notes, the Company will promptly
return tendered Old Notes to the Holders thereof. See "The Exchange Offer."
Prior to this Exchange Offer, there has been no public market for the Notes.
The Company does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active public market for the New
Notes will develop.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus (this "Prospectus") in connection with the offer made hereby
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or any other person. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
or incorporated by reference herein is correct as of any time subsequent to
its date. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy the securities offered hereby by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information (including the financial statements and the notes thereto) included
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated, all references herein
to the "Company," "PCW" or "Palmer" include their respective subsidiaries and
predecessors. References herein to the "Acquisition" refer to the acquisition
by the Company of Palmer and the related sale of the Fort Myers system of
Palmer, as described below under "The Acquisition." EXCEPT FOR HISTORICAL
FINANCIAL INFORMATION AND UNLESS OTHERWISE INDICATED, ALL INFORMATION PRESENTED
BELOW RELATING TO THE COMPANY, INCLUDING POPS, NET POPS AND THE COMPANY'S
SYSTEMS, GIVES EFFECT TO THE CONSUMMATION OF THE ACQUISITION (INCLUDING THE
SALE OF THE FORT MYERS SYSTEM).
THE COMPANY
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. At
June 30, 1997, after giving effect to the Acquisition, PCW provided cellular
telephone service to 287,665 subscribers in Georgia, Alabama, Florida and South
Carolina in a total of 17 licensed service areas composed of eight Metropolitan
Statistical Areas ("MSAs") and nine Rural Service Areas ("RSAs"), with an
aggregate estimated population of 3.5 million. PCW sells its cellular telephone
service as well as a full line of cellular products and accessories principally
through its network of retail stores. PCW markets all of its products and
services under the nationally recognized service mark CELLULAR ONE.
During the first six months of 1997, on a pro forma basis, after giving
effect to the Acquisition, the Company's subscriber base increased from 245,396
to 287,665 or 17.2%. On a pro forma basis, the Company's operating income
before depreciation and amortization ("EBITDA") was $32.4 million for the first
six months of 1997. See "Summary Historical and Unaudited Pro Forma Financial
and Operating Data."
OPERATIONS
The Company has developed its business through the acquisition and
integration of cellular telephone systems, clustering multiple systems in order
to provide broad areas of uninterrupted service and achieve certain economies
of scale, including centralized marketing and administrative functions as well
as multi-system capital expenditures. The Company devotes considerable
attention to engineering, maintenance and improvement of its cellular telephone
systems in an effort to deliver high-quality service to its subscribers and to
implement new technologies as soon as economically practicable. Through its
participation in the North American Cellular Network ("NACN"), PCW is able to
offer seven-digit dialing access to its subscribers when they travel outside
the Company's service areas, providing them with convenient roaming access
throughout large areas of the United States, Canada, Mexico and Puerto Rico
served by other NACN participants. By marketing its products and services under
the CELLULAR ONE name, PCW also enjoys the benefits of association with a
nationally recognized service mark.
The Company's cellular telephone systems include 15 contiguous licensed
service areas in Georgia, Alabama and South Carolina, as well as systems in
Georgia-1 RSA and Panama City, Florida. The following table sets forth as of
July 18, 1997, after giving effect to the Acquisition, with respect to each
service area in which PCW owns a cellular telephone system, the estimated
population, PCW's beneficial ownership percentage, the Net Pops and the date of
initial operation of such system by Palmer or a predecessor operator.
3
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED OWNERSHIP DATE SYSTEM
SERVICE AREA(1) POPULATION(2) PERCENTAGE NET POPS OPERATIONAL
<S> <C> <C> <C> <C>
Albany, GA.................... 118,527 82.7% 98,061 4/88
Augusta, GA................... 439,116 100.0 439,116 4/87
Columbus, GA.................. 254,150 85.2 216,518 11/88
Macon, GA..................... 313,686 99.2 311,234 12/88
Savannah, GA.................. 283,878 98.5 279,578 3/88
Georgia-1 RSA................. 223,098 100.0 223,098 10/92
Georgia-6 RSA................. 199,516 95.0 189,560 4/93
Georgia-7 RSA................. 134,376 100.0 134,376 10/91
Georgia-8 RSA................. 157,451 100.0 157,451 10/91
Georgia-9 RSA................. 119,410 100.0 119,410 9/92
Georgia-10 RSA................ 149,699 100.0 149,699 10/91
Georgia-12 RSA................ 211,799 100.0 211,799 10/91
Georgia-13 RSA................ 147,392 82.7 121,942 10/90
Dothan, AL.................... 136,160 94.4 128,535 2/89
Montgomery, AL................ 318,371 92.8 295,430 8/88
Alabama-8 RSA................. 173,993 100.0 171,993 7/93
--------- ---------
Subtotal.................... 3,378,622 3,247,800
--------- ---------
Panama City, FL............... 146,018 78.4 114,493 9/88
--------- ---------
Total....................... 3,524,640 3,362,293
========= =========
</TABLE>
- --------------------
(1) Does not include the Alabama-5 RSA, South Carolina-7 RSA and South
Carolina-8 RSA where PCW has interim operating authority ("IOA"). PCW has
no subscribers in the South Carolina-7 RSA and South Carolina-8 RSA, but
instead provides roaming access to its own subscribers and others when they
travel in these two service areas, utilizing its existing cell sites.
Construction permits were granted to third parties ("Permittees") for the
Alabama-5 RSA and South Carolina-8 RSA on May 20, 1997. The Permittees are
required to complete construction of their respective RSA within 18 months.
After completing construction, a Permittee may give the Company ten days
prior written notice, at which point the Company would be required to sell
its subscribers to the Permittee at cost. The application for a
construction permit for the South Carolina-7 RSA has been remanded by the
FCC to the Wireless Bureau for further review.
(2) Based on population estimates for 1996 from the 1996 Donnelley Market
Information Service.
COMPANY STRATEGY
The Company's four strategic objectives are to: (1) expand its revenue base
by increasing penetration in existing service areas and encouraging greater
usage among its existing customers, (2) provide high-quality customer service
to create and maintain customer loyalty, (3) enhance performance by
aggressively pursuing opportunities to increase operating efficiencies and (4)
expand its regional wireless communications presence by selectively acquiring
additional interests in cellular telephone systems (including minority
interests). Specifically, the Company strives to achieve these objectives
through implementation of the following:
Aggressive, Direct Marketing. The Company employs a two-tier direct sales
force. A retail sales force handles walk-in traffic at the Company's 33 retail
outlets, and a targeted sales staff solicits certain industries and government
subscribers. PCW's management believes that its internal sales force is more
likely than independent agents to successfully select and screen new
subscribers and select pricing plans that realistically match subscriber means
and needs. In addition, the Company motivates its direct sales force to sell
appropriate rate plans to subscribers, thereby reducing churn, by linking
payments of commissions to subscriber retention. By lowering commissions and
reducing churn, the Company's use of a direct sales force keeps its marketing
costs among the industry's lowest.
4
<PAGE>
Flexible, Value-Oriented Pricing Plans. PCW provides a range of pricing
plans, each of which includes a monthly access fee and a bundle of "free"
minutes. Additional home rate minutes are charged at rates ranging from $0.05
per minute to $0.30 per minute depending on usage plan and time of day. In
addition, the Company offers wide area home rate roaming in the Company's
systems and low flat rate roaming in a six state region in the Southeastern
United States.
Adopting State of the Art System Design. The Company presently plans to roll
out TDMA (Time Division Multiple Access) digital cellular services in its major
markets during 1997. The Company's network, combined with its use of the IS-136
protocol, allows the delivery of full personal communications services ("PCS")
functionality to its digital cellular customers--primarily caller ID, short
message paging and extended battery life. In addition, the Company's network
currently provides for the seamless handoff from PCS (1900 MHZ) to digital
cellular (800 MHZ). The Company believes this innovation will allow the Company
to be the roaming partner of choice for PCS operators employing TDMA
technology. The Company has already reached an agreement with AT&T with respect
to PCS roaming and expects that other PCS operators may choose, like AT&T, to
concentrate PCS buildout in urban centers rather than the more rural areas in
which the Company concentrates.
Focusing on Customer Service. Customer service is an essential element of the
Company's marketing and operating philosophy. The Company is committed to
attracting new subscribers and retaining existing subscribers by providing
consistently high-quality customer service. In each of its cellular service
areas, the Company maintains a local staff, including a market manager,
customer service representatives, technical and engineering staff, sales
representatives and installation and repair facilities. Each cellular service
area handles its own customer-related functions such as credit evaluations,
customer evaluations, account adjustments and rate plan changes. In addition,
subscribers are able to report cellular telephone service or account problems
to the Company's headquarters 24 hours a day. To ensure high-quality service,
Cellular One Group authorizes a third-party marketing research firm to perform
customer satisfaction surveys of each of its licensees. Licensees must achieve
a minimum satisfaction level in order to continue using the Cellular One
service mark. The Company has repeatedly ranked number one in customer
satisfaction among all Cellular One operators (#1 MSA in 1996, 1995, 1993, and
1992; #1 RSA in 1995).
Aggressive Cost Control Efforts. The Company believes that its monthly
operating costs per subscriber rank among the lowest in the industry. The
Company's management attributes this competitive advantage to a variety of
factors, including the efficiencies associated with its direct sales force, the
Company's low churn experience, extensive use of in-house technical and
engineering staff, maintenance of aggressive fraud control procedures and in-
house billing capabilities, as well as general efforts to reduce corporate
general and administrative expenses. The Company has also realized substantial
savings on its interconnection charges from landline carriers by using its own
microwave and fiber optic network to connect cellular switching equipment to
cell sites without the use of landline carriers.
THE ACQUISITION
The Company currently has no assets, liabilities or operations. The Company
is a wholly owned indirect subsidiary of Price Communications Corporation
("PCC"), which was incorporated in 1979, and also of Price Communications
Cellular, Inc., the original parent of PriCellular Corporation.
On May 23, 1997, PCC, the Company and Palmer entered into an Agreement and
Plan of Merger (the "Merger Agreement"). The Merger Agreement provides, among
other things, for the merger of the Company with and into Palmer with Palmer as
the surviving corporation (the "Merger"). At or subsequent to the Merger,
Palmer will change its name to "Price Communications Wireless, Inc." Pursuant
to the Merger Agreement, PCC has agreed to acquire each issued and outstanding
share of common stock of Palmer for a purchase price of $17.50 per share in
cash and to purchase outstanding options and rights under employee and director
stock purchase plans for an aggregate purchase price of $488.2 million. As a
result of the Merger, the Company will
5
<PAGE>
assume all outstanding indebtedness of Palmer ("Palmer Existing Indebtedness").
The Company intends to refinance all of the Palmer Existing Indebtedness
concurrently with the consummation of the Merger.
PCW has entered into an agreement (the "Fort Myers Sale Agreement") to sell,
subject to certain conditions (some of which may be waived by the parties to
the Merger Agreement), including Federal Communications Commission ("FCC")
approval, Palmer's Fort Myers, Florida MSA covering approximately 382,000 Pops
for $168.0 million (which will generate proceeds to the Company of
approximately $166.3 million) (the "Fort Myers Sale"). The proceeds of the Fort
Myers Sale will be used to fund a portion of the acquisition of Palmer. In
addition, PCC also entered into an agreement with Palmer Communications
Incorporated ("PCI"), which is the majority shareholder of Palmer, pursuant to
which PCI has agreed to vote its shares of common stock of Palmer in favor of
the Merger.
In order to fund the Acquisition and pay related fees and expenses, the
Company issued the Old Notes and will enter into a syndicated senior loan
facility providing for term loan borrowings in the aggregate principal amount
of approximately $325.0 million and revolving loan borrowings of $200.0 million
(the "New Credit Facility"). At the effective time of the Merger, the Company
is expected to borrow all term loans available thereunder and approximately
$101.0 million of revolving loans. PCC has received a commitment letter from
DLJ Capital Funding, Inc. ("DLJ Capital Funding"), an affiliate of Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), the lead Initial Purchaser,
to provide the New Credit Facility, which will be syndicated by DLJ Capital
Funding. The commitment is subject to significant conditions, including the
absence of material adverse change, the negotiation, execution and delivery of
definitive documentation, consummation of the Fort Myers Sale (or arrangements
satisfactory to the lenders under the New Credit Facility for short-term
financing bridging such sale), the repayment of the Palmer Existing
Indebtedness and consummation of the Merger and the redemption or amendment (on
terms satisfactory to the lenders under the New Credit Facility) of PCC's
outstanding PIK Preferred Stock. See "Description of New Credit Facility."
The acquisition of Palmer will be funded in part through a $128.3 million
equity contribution from PCC (the "PCC Equity Contribution") which may be in
the form of cash or common stock of Palmer. PCC has raised $47.5 million of the
purchase price for the Acquisition through an offering by Price Communications
Cellular Holdings, Inc. ("Holdings"), a wholly owned indirect subsidiary of PCC
and the direct parent of the Company, of units consisting of 13 1/2% Senior
Secured Discount Notes due 2007 and warrants to purchase shares of common stock
of PCC (the "Holdings Offering").
Although the Company expects the Acquisition to be consummated in October
1997, there can be no assurance that the Acquisition will be consummated at
that time. If the acquisition of Palmer does not occur by December 31, 1997,
the Company will redeem the Notes with the funds held by the Trustee for 101%
of the principal amount thereof, plus accrued interest to the date of
redemption. See "Description of Notes--Special Redemption."
6
<PAGE>
The following table sets forth the estimated sources and uses of funds for
the Acquisition and related fees and expenses:
<TABLE>
<CAPTION>
TOTAL SOURCES: (IN MILLIONS)
<S> <C>
New Credit Facility:
Term loan................................................ $325.0
Revolving credit facility................................ 101.0
Old Notes.................................................. 175.0
PCC Equity Contribution.................................... 128.3
Proceeds from Fort Myers Sale.............................. 166.3
------
Total sources.......................................... $895.6
======
TOTAL USES:
Cash consideration for Palmer common stock................. $488.2
Palmer Existing Indebtedness (as of June 30, 1997) ........ 383.1
Estimated transaction fees and expenses.................... 23.6
Excess cash................................................ .7
------
Total uses............................................. $895.6
======
</TABLE>
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale. The Company has a tax planning strategy
which it believes will avoid the payment of the $56.2 million tax which would
otherwise be payable in connection with the Fort Myers Sale. While there can be
no assurances that the Company's position will prevail if challenged, the
Company has received a written opinion from a "big-six" accounting firm (other
than Arthur Andersen LLP) that, under existing laws, it is more likely than not
that the Company's position will prevail if challenged. In order to effect this
tax strategy, the partnership that owns the Fort Myers system will need to
incur approximately $169.0 million of indebtedness. The partnership has no
commitments for such financing and there can be no assurance it will be
successful in obtaining such financing.
The foregoing table also does not reflect $1.4 million which will be
immediately payable to William J. Ryan as a severance payment pursuant to his
existing employment contract upon consummation of the Acquisition and
approximately $2.6 million of severance payments which could become payable
over several years pursuant to existing employment contracts between Palmer and
its other executive officers. The Company has entered into employment contracts
with Mr. Ryan and M. Wayne Wisehart to continue as officers after the
consummation of the Acquisition and it expects to enter into employment
contracts with other key employees prior to the consummation of the
Acquisition. Except for $1.4 million payable to Mr. Ryan, there can be no
assurances as to the amount of payments that may be made to such officers, in
recognition of such severance rights, whether or not they continue with the
Company after the consummation of the Acquisition. See "Management."
7
<PAGE>
THE EXCHANGE OFFER
Securities Offered.......... Up to $175,000,000 principal amount of 11 3/4%
Senior Subordinated Exchange Notes due 2007. The
terms of the New Notes and the Old Notes are
identical in all material respects, except that
the offer of the New Notes will have been
registered under the Securities Act and
therefore, the New Notes will not be subjected to
certain transfer restrictions, registration
rights and related liquidated damage provisions
applicable to the Old Notes.
The Exchange Offer.......... The Company is offering, upon the terms and
subject to the conditions of the Exchange Offer,
to exchange $1,000 principal amount of New Notes
for each $1,000 principal amount of Old Notes.
See "The Exchange Offer" for a description of the
procedures for tendering Old Notes. The Exchange
Offer is intended to satisfy obligations of the
Company under the Registration Rights Agreement,
dated July 10, 1997, between the Company and
Donaldson, Lufkin & Jenrette Securities
Corporation, Wasserstein Perella Securities,
Inc., NatWest Capital Markets Limited, Lehman
Brothers, Inc. and PaineWebber Incorporated
(collectively, the "Initial Purchasers").
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal.................. York City time, on , 1997, or such later
date and time to which it is extended. The tender
of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration
Date. Any Old Notes not accepted for exchange for
any reason will be returned without expense to
the tendering Holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Federal Income Tax The exchange pursuant to the Exchange Offer will
Consequences................ not result in any income, gain or loss to the
Holders or the Company for federal income tax
purposes. See "United States Federal Income Tax
Consequences of the Exchange Offer."
Use of Proceeds............. There will be no proceeds to the Company from the
issuance of the New Notes pursuant to the
Exchange Offer.
Exchange Agent.............. Bank of Montreal Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
CONSEQUENCE OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the SEC, the Company believes that, generally, any Holder of Old
Notes (other than a broker-dealer, as set forth below, and any Holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who exchanges Old Notes for New Notes pursuant to the Exchange Offer may
offer such New Notes for resale, resell such New Notes, or otherwise transfer
such New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the Holder's business and such Holder has no arrangement or
understanding with any person to participate in a distribution of
8
<PAGE>
such New Notes. Eligible Holders wishing to accept the Exchange Offer must
represent to the Company in the Letter of Transmittal that such conditions have
been met and must represent, if such Holder is not a broker-dealer, or is a
broker-dealer but will not receive New Notes for its own account in exchange
for Old Notes, that neither such Holder nor the person receiving such New
Notes, if other than the Holder, is engaged in or intends to participate in the
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must represent that the Old Notes
tendered in exchange therefor were acquired as a result of market-making
activities or other trading activities and must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution." To comply with the securities laws of certain jurisdictions,
it may be necessary to qualify for sale or register the New Notes prior to
offering or selling such New Notes. The Company does not currently intend to
take any action to register or qualify the New Notes for resale in any such
jurisdictions. If a Holder of Old Notes does not exchange such Old Notes for
New Notes pursuant to the Exchange Offer, such Old Notes will continue to be
subject to the restrictions on transfer contained in the legend thereon. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Any Holder
who tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of New Notes could not rely on the
position of the staff of the SEC enunciated in Exxon Capital Holdings
Corporation (available May 13, 1986) or similar no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Failure to comply with such requirements in such
instance may result in such Holder incurring liability under the Securities Act
for which the Holder is not indemnified by the Company. See "The Exchange
Offer--Consequences of Failure to Exchange" and "Description of Notes--
Registration Rights; Liquidated Damages."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the offer of the New Notes will have been registered
under the Securities Act and, therefore, the New Notes will not be subject to
certain transfer restrictions, registration rights and related provisions
applicable to the Old Notes.
Notes Offered............... Up to $175,000,000 aggregate principal amount of
11 3/4% Senior Subordinated Exchange Notes due
2007.
Interest.................... Payable semi-annually on each January 15 and July
15 commencing on January 15, 1998. The New Notes
will bear interest from July 10, 1997. Holders of
Old Notes whose Old Notes are accepted for
exchange will be deemed to have waived the right
to receive any payment in respect of interest on
such Old Notes accrued from July 10, 1997 to the
date of the issuance of the New Notes.
Consequently, Holders who exchange their Old
Notes for New Notes will receive the same
interest payment on January 15, 1998 (the first
interest payment date with respect to the Old
Notes and the New Notes) that they would have
received had they not accepted the Exchange
Offer.
Maturity Date............... July 15, 2007.
Optional Redemption......... The Notes are redeemable, in whole or in part, at
the option of the Company, at any time on or
after July 15, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. See
"Description of Notes--Optional Redemption."
9
<PAGE>
Special Redemption.......... The Notes are subject to a special redemption on
at least five business days' notice given at any
time on or prior to December 31, 1997 with monies
held by the Trustee at 101% of the principal
amount thereof, plus accrued interest to the date
of redemption, if the acquisition of Palmer is
not consummated on or before December 31, 1997 or
if it appears, in the sole judgment of the
Company, that the acquisition of Palmer will not
be consummated on or before December 31, 1997.
The proceeds from the Offering together with
approximately $18.0 million in cash (an amount
sufficient to pay principal, premium and interest
accrued through December 31, 1997) are being held
by and pledged to the Trustee pursuant to the
indenture governing the Notes (the "Indenture")
and invested in certain Eligible Investments (as
defined), and the obligation of the Company to
repay the principal amount of the Notes is
secured by such Eligible Investments. See
"Description of Notes--Special Redemption."
Ranking..................... The Notes will be general unsecured obligations
of the Company and will be subordinated in right
of payment to all Senior Indebtedness of the
Company. As of June 30, 1997, on a pro forma
basis after giving effect to the Offering, the
application of the estimated net proceeds
therefrom and the Acquisition, the Company would
have had $426.0 million of outstanding Senior
Indebtedness.
Certain Covenants........... The Indenture imposes certain limitations on the
ability of the Company and its subsidiaries to,
among other things, incur Indebtedness (as
defined), make Restricted Payments (as defined),
effect certain Asset Sales (as defined), enter
into certain transactions with Related Persons
(as defined), merge or consolidate with any other
person or transfer all or substantially all of
their properties and assets. See "Description of
Notes--Certain Covenants."
Change of Control........... Upon the occurrence of a Change of Control (as
defined), each Holder of Notes will have the
right to require the Company to repurchase such
Holder's Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest
thereon, if any, to the repurchase date.
10
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL AND OPERATING DATA
The following table sets forth summary historical data for Palmer and the
unaudited pro forma and financial data for the Company for the periods and as
of the dates indicated. The unaudited pro forma data is not designed to
represent and does not represent what the Company's financial position or
results of operations actually would have been had the transactions described
herein under "Unaudited Pro Forma Condensed Consolidated Financial Statements"
been completed as of the date or at the beginning of the periods indicated, or
to project the Company's financial position or results of operations at any
future date or for any future period. The following data should be read in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Condensed Consolidated Financial Statements" and the
consolidated financial statements and notes thereto of Palmer included
elsewhere herein.
The following table also sets forth certain summary operating data for Palmer
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
PRO FORMA
---------------------
SIX
YEAR MONTHS
YEAR ENDED SIX MONTHS ENDED ENDED
DECEMBER 31, ENDED JUNE 30, DECEMBER 31, JUNE 30,
-------------------------- ---------------- ------------ --------
1994(1) 1995(2) 1996(3) 1996 1997 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF
OPERATIONS DATA:
Revenue:
Service................ $61,021 $96,686 $151,119 $72,741 $88,140 $128,537 $ 74,750
Equipment sales and
installation.......... 7,958 8,220 8,624 4,239 5,088 7,062 4,212
------- ------- -------- ------- ------- -------- --------
Total revenue........ 68,979 104,906 159,743 76,980 93,228 135,599 78,962
Engineering, technical
and other
direct expenses........ 12,776 18,184 28,717 14,939 15,554 23,276 12,099
Cost of equipment....... 11,546 14,146 17,944 8,397 11,057 15,311 9,417
Selling, general and
administrative
expenses............... 19,757 30,990 46,892 21,977 27,204 43,017 25,039
Depreciation and
amortization........... 9,817 15,004 25,013 11,872 15,129 35,696 20,379
------- ------- -------- ------- ------- -------- --------
Operating income........ 15,083 26,582 41,177 19,795 24,284 18,299 12,028
Other income (expense):
Interest, net.......... (12,715) (21,213) (31,462) (16,006) (16,113) (58,523) (29,339)
Other, net............. (70) (687) (429) (58) 162 (366) 162
------- ------- -------- ------- ------- -------- --------
Total other expense.. (12,785) (21,900) (31,891) (16,064) (15,951) (58,889) (29,177)
Minority interest share
of income.............. (636) (1,078) (1,880) (1,023) (782) (1,880) (782)
Income taxes (expense)
benefit................ 0 (2,650) (2,724) (948) (3,851) 1,504 (1,737)
------- ------- -------- ------- ------- -------- --------
Net income (loss)....... $ 1,662 $ 954 $ 4,682 $ 1,760 $ 3,700 $(40,966) $(19,668)
======= ======= ======== ======= ======= ======== ========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
----------------------
SIX
YEAR MONTHS
YEAR ENDED SIX MONTHS ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
--------------------------- ------------------ ------------ ---------
1994(1) 1995(2) 1996(3) 1996 1997 1996 1997
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Capital expenditures.... $ 22,541 $ 36,564 $41,445 $ 21,639 $ 31,700 -- --
Operating income before
depreciation and
amortization
("EBITDA")(4).......... $ 24,900 $ 41,586 $66,190 $ 31,667 $ 39,413 $ 53,995 $ 32,407
EBITDA margin on service
revenue................ 40.8% 43.0% 43.8% 43.5% 44.7% 42.0% 43.4%
Penetration(5).......... 4.58% 6.41% 7.45% 6.85% 8.29% 7.28% 8.12%
Subscribers at end of
period(6).............. 117,224 211,985 279,816 243,887 325,653 245,396 287,665
Cost to add a net
subscriber(7).......... $ 247 $ 276 $ 407 $ 375 $ 480 $ 434 $ 477
Average monthly service
revenue per
subscriber(8).......... $ 60.02 $ 56.68 $ 52.20 $ 54.05 $ 48.06 $ 50.37 $ 46.20
Average monthly
churn(9)............... 1.55% 1.55% 1.84% 1.63% 1.79% 1.89% 1.78%
CONSOLIDATED BALANCE
SHEET DATA:
Cash.................... $ 1,698 $ 1,740 $ 2,270
Working capital
(deficit).............. 296 2,290 (50,082)(10)
Property, plant and
equipment, net......... 132,438 157,596 146,687
Licenses and other
intangibles, net....... 387,067 409,193 829,174
Total assets............ 549,942 597,202 1,003,579
Total debt.............. 343,662 380,321 601,000
Stockholders' equity.... 164,930 168,630 128,250
</TABLE>
- --------
(1) Includes the Georgia Acquisition (as defined herein), which occurred on
October 31, 1994. For the two months ended December 31, 1994, the Georgia
Acquisition resulted in revenues to Palmer of $1,803 and operating loss of
$645.
(2) Includes the GTE Acquisition (as defined herein), which occurred on
December 1, 1995. For the one month ended December 31, 1995, the GTE
Acquisition resulted in additional revenues to Palmer of $2,126 and
additional operating income of $208.
(3) Includes the acquisition of the cellular telephone systems of USCOC (as
defined herein) (Georgia-1 RSA), which occurred on June 20, 1996, and
Horizon (as defined herein) (Georgia-6 RSA), which occurred on July 5,
1996. The acquisition of USCOC and Horizon resulted in revenues to Palmer
of $1,239 and $2,682, respectively, and operating income (loss) of $(278)
and $743, respectively, during such year.
(4) Operating income before depreciation and amortization should not be
considered in isolation or as an alternative to net income (loss),
operating income (loss) or any other measure of performance under
generally accepted accounting principles ("GAAP"). The Company believes
that operating income before depreciation and amortization is viewed as a
relevant supplemental measure of performance in the cellular telephone
industry.
(5) Determined by dividing the aggregate number of subscribers by the
estimated population.
(6) Each billable telephone number in service represents one subscriber.
(7) Determined for a period by dividing (i) all costs of sales and marketing,
including salaries, commissions and employee benefits and all expenses
incurred by sales and marketing personnel, agent commissions, credit
reference expenses, losses on cellular telephone sales, rental expenses
allocated to retail operations, net installation expenses and other
miscellaneous sales and marketing charges, by (ii) the net subscribers
added during such period.
(8) Determined for a period by dividing (i) the sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period, divided by the number of months in such period.
(9) Determined for a period by dividing total subscribers discontinuing
service by the average number of subscribers for such period and dividing
that result by the number of months in such period.
(10) Working capital deficit includes a $56.2 million current tax payable
attributable to the Fort Myers Sale. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements."
12
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, Holders of
the Old Notes should carefully consider the following risk factors before
accepting the Exchange Offer.
This Prospectus contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Prospectus and
include statements regarding the intent, belief or current expectations of the
Company, its directors or its officers primarily with respect to the future
operating performance of the Company. Holders of the Old Notes are cautioned
that any such forward looking statements are not guarantees of future
performance and may involve risks and uncertainties, and that actual results
may differ from those in the forward looking statements as a result of
factors, many of which are outside the control of the Company. The
accompanying information contained in this Prospectus, including without
limitation the information set forth below and the information under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations," identifies important factors that could cause such
differences.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
The Company believes that, based upon interpretations contained in letters
issued to third parties by the staff of the SEC, New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
or otherwise transferred by each Holder thereof (other than a broker-dealer,
as set forth below, and any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of such
Holder's business and such Holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Eligible Holders
wishing to accept the Exchange Offer must represent to the Company in the
Letter of Transmittal that such conditions have been met and must represent,
if such Holder is not a broker-dealer, or is a broker-dealer but will not
receive New Notes for its own account in exchange for Old Notes, that neither
such Holder nor the person receiving such New Notes, if other than the Holder,
is engaged in or intends to participate in the distribution of such New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must represent that the Old Notes tendered in exchange therefor
were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with the resales of
New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 90 days
after the Expiration Date (as defined herein), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied
with. The Company does not currently intend to take any action to register or
qualify the New Notes for resale in any such jurisdictions. In addition, the
tender of Old Notes pursuant to the Exchange Offer will reduce the principal
amount of the Old Notes outstanding, which may have an adverse effect upon,
and increase the volatility of, the market price of the Old Notes due to a
reduction in liquidity.
EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and avoid the restrictions on Old
Notes, each Holder of Old Notes must transmit a properly completed Letter of
Transmittal, including all other documents required by such Letter
13
<PAGE>
of Transmittal, to Bank of Montreal Trust Company (the "Exchange Agent") at
the address set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
Holder must comply with the guaranteed delivery procedures described below.
See "The Exchange Offer."
LEVERAGE, LIQUIDITY AND ABILITY TO MEET REQUIRED DEBT SERVICE
On a pro forma basis, after giving effect to the Offering and the financing
of the Acquisition, the Company's consolidated ratio of long-term debt to
stockholders' equity would have been 4.69 to 1.00 at June 30, 1997 and its
ratio of EBITDA to interest expense would have been 0.92 to 1.00 and 1.10 to
1.00 for the year ended December 31, 1996 and the six months ended June 30,
1997, respectively. The Company's high degree of leverage could limit
significantly its ability to make acquisitions, withstand competitive
pressures or adverse economic conditions, obtain necessary financing or take
advantage of business opportunities that may arise.
Upon consummation of the Acquisition, the Company's only committed source of
liquidity is expected to be the New Credit Facility. While the Company expects
to have sufficient availability under the New Credit Facility to meet its
liquidity needs, the terms of the New Credit Facility which determine the
availability thereunder are still under negotiation. The Company intends to
use the availability under the New Credit Facility for general corporate
purposes and, if the Company's tax planning strategy is unsuccessful, to
finance the $56.2 million tax payment due with respect to the Fort Myers Sale.
See "Unaudited Pro Forma Condensed Consolidated Financial Statements."
Although DLJ Capital Funding has committed to provide the New Credit Facility,
this commitment is subject to significant conditions, including the
negotiation, execution and delivery of definitive documentation. Therefore,
there can be no assurances that the New Credit Facility will be entered into.
In addition, borrowings under the New Credit Facility will be subject to
significant conditions, including compliance with certain financial ratios and
the absence of any material adverse change. If the Fort Myers Sale is not
consummated, the Company will need to obtain $166.3 million of additional
financing to consummate the acquisition of Palmer. There can be no assurances
the Company will be able to obtain such financing or as to the terms of any
such financing, all of which could be additional indebtedness. The Company's
ability to meet its working capital and operational needs and to provide funds
for debt service, capital expenditures and other cash requirements is
dependent upon the availability of financing under the New Credit Facility. In
addition, the Company intends to pursue opportunities to acquire additional
cellular telephone systems which, if successful, will require the Company to
obtain additional equity or debt financing to fund such acquisitions. There
can be no assurances as to the availability or terms of any such financing or
that the terms of the Notes or the New Credit Facility will not restrict or
prohibit any such debt financing. See "Description of New Credit Facility" and
"Description of Notes."
The Company's ability to borrow is also limited by the terms of PCC's
outstanding preferred stock, which limits the ability of PCC and its
restricted subsidiaries, including the Company and its subsidiaries, to incur
additional indebtedness and to make certain restricted payments, including
investments. These limitations are generally more restrictive than those
contained under the "Limitation on Incurrence of Additional Indebtedness" and
"Limitation on Restricted Payments" covenants contained in the Indenture.
There can be no assurances that such restrictions will not have an adverse
effect on the Company's financial condition or ability to implement its
business plan.
The Company's ability to meet its debt service requirements, including those
represented by the Notes, will require significant and sustained growth in the
Company's cash flow. There can be no assurance that the Company will be
successful in improving its cash flow by a sufficient magnitude or in a timely
manner or in raising additional equity or debt financing to enable the Company
to meet its debt service requirements.
14
<PAGE>
NET LOSSES
On a pro forma basis after giving effect to the Offering and the financing
of the Acquisition, the Company would have incurred net losses of
approximately $41.0 million and $19.7 million, respectively, for the year
ended December 31, 1996 and the six months ended June 30, 1997. There can be
no assurance that the Company's future operations will generate sufficient
earnings to pay its obligations. See "Selected Consolidated Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
SUBORDINATION
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including all indebtedness under the New Credit
Facility. As of June 30, 1997, on a pro forma basis after giving effect to the
Offering and the financing of the Acquisition, the Company would have had
approximately $426.0 million of Senior Indebtedness substantially all of which
will be secured. By reason of such subordination, in the event of the
insolvency, liquidation, reorganization, dissolution or other winding-up of
the Company or upon a default in payment with respect to, or the acceleration
of, any Senior Indebtedness, the holders of such Senior Indebtedness and any
other creditors of subsidiaries, if any, must be paid in full before the
Holders of the Notes may be paid. If the Company incurs any additional pari
passu debt, the holders of such debt would be entitled to share ratably with
the Holders of the Notes in any proceeds distributed in connection with any
insolvency, liquidation, reorganization, dissolution or other winding-up of
the Company. This may have the effect of reducing the amount of such proceeds
paid to Holders of the Notes.
ACQUISITION MAY NOT BE CONSUMMATED OR MAY NOT BE CONSUMMATED AS DESCRIBED
The consummation of the Acquisition is subject to the satisfaction of
certain conditions, including FCC approval. All such FCC approvals have been
obtained and as of September 29, 1997, all such approvals are expected to be
final (no longer subject to administrative or court review).
In addition, the consummation of the financing related to the Acquisition,
including the PCC Equity Contribution and loans under the New Credit Facility,
are subject to significant conditions. The failure of any such conditions to
be met could result in the failure of the Company to consummate the
Acquisition. There can be no assurances that the Company will be successful in
consummating the Acquisition or in consummating the Acquisition in a timely
manner or subsequent to FCC approval. Failure to consummate the Merger by the
Special Redemption Date would result in the redemption of the Notes. See
"Description of Notes--Special Redemption."
Except for the historical financial information and as otherwise indicated,
all of the information contained in this Prospectus relating to the Company,
including the pro forma financial information and information regarding Pops,
Net Pops and systems gives effect to the consummation of the Acquisition,
including the Fort Myers Sale, on the terms set forth in the Merger Agreement
and the Fort Myers Sale Agreement. Although the Company believes that such
transactions will be consummated on such terms, there can be no assurances
that such transactions will be consummated or that they will be consummated on
the terms described herein. The only conditions to the release of the proceeds
of this Offering from the secured account with the Trustee are that (i) the
Company shall have received the PCC Equity Contribution, (ii) the Company
shall have entered into a senior loan facility syndicated by DLJ Capital
Funding and have obtained at least $325.0 million of borrowings thereunder and
(iii) the merger of the Company into Palmer shall occur concurrently with such
release. In addition, if the Fort Myers Sale is not consummated, the Company
will need to obtain $166.3 million of additional financing to consummate the
acquisition of Palmer. There can be no assurances that the Company will be
able to obtain such financing or as to the terms of any such financing, most
or all of which could be additional indebtedness. See "Description of Notes."
15
<PAGE>
Furthermore, Palmer and its subsidiaries will not be subject to the
covenants contained in the Indenture prior to the consummation of the Merger.
Accordingly, there can be no assurances that Palmer will not incur additional
indebtedness, sell assets, pay dividends or take other actions prior to the
consummation of the Merger that would be prohibited or restricted by the
covenants contained in the Indenture if they were applicable. While such
actions are restricted by the Merger Agreement, there can be no assurances
that the Company will not waive such restrictions.
COMPETITION
Although current policies of the FCC authorize only two licensees to operate
cellular telephone systems in each cellular market, there is, and the Company
expects there will continue to be, significant competition from the other
licensee authorized to serve each cellular market in which the Company
operates, as well as from resellers of cellular service. Competition for
subscribers between cellular licensees is based principally upon the services
and enhancements offered, the technical quality of the cellular telephone
system, customer service, system coverage and capacity and price. The Company
competes with a wireline licensee in each of its cellular markets, some of
which are larger and have access to more substantial capital resources than
the Company.
The Company also faces competition from other existing communications
technologies such as conventional mobile telephone service, specialized mobile
radio ("SMR") and enhanced specialized mobile radio ("ESMR") systems and
paging services. ESMR is a "cellular-like" communications service supplied by
converting analog SMR services into an integrated, digital transmission system
providing for call hand-off, frequency reuse and wide call delivery networks.
The Company also faces limited competition from and may in the future face
increased competition from PCS. It is expected that broadband PCS will involve
a network of small, low-powered transceivers placed throughout a neighborhood,
business complex, community or metropolitan area to provide customers with
mobile and portable voice and data communications. PCS may be capable of
offering, and PCS operators claim they will offer, additional services not
offered by cellular providers. PCS subscribers could have dedicated personal
telephone numbers and would communicate using small digital radio handsets
that could be carried in a pocket or purse. There can be no assurances that
the Company will be able to provide nor that it will choose to pursue,
depending on the economics thereof, such services and features. The Company
currently believes that traditional tested cellular is economically proven
unlike many of these other technologies and therefore does not intend to
pursue such other technologies.
Although the Company believes that the technology, financing and engineering
of these other technologies is not as advanced as their publicity would
suggest, there can be no assurance that one or more of the technologies
currently utilized by the Company in its business will not become obsolete at
some time in the future. See "Business--Competition."
The Company also faces competition from "resellers." The FCC requires all
cellular licensees to provide service to resellers. A reseller provides
wireless service to customers but does not hold an FCC license or own
facilities. Instead, the reseller buys blocks of wireless telephone numbers
and capacity from a licensed carrier and resells service through its own
distribution network to the public.
POTENTIAL FOR REGULATORY CHANGES AND NEED FOR REGULATORY APPROVALS
The licensing, construction, operation, acquisition, assignment and transfer
of cellular telephone systems, as well as the number of licensees permitted in
each market, are regulated by the FCC. Changes in the regulation of cellular
activities could have a material adverse effect on the Company's operations.
In addition, all cellular licenses in the United States are granted for an
initial term of up to 10 years and are subject to renewal. The Company's
cellular licenses expire in the following years with respect to the following
number of service areas: 1997 (four); 1998 (three); 2000 (two); 2001 (four);
2002 (three) and 2006 (one). While the Company believes that each of these
licenses will be renewed based upon FCC rules establishing a renewal
expectancy in favor of licensees that have complied with their regulatory
obligations during the initial license period, there can be no assurance that
all of the Company's licenses will be renewed in due course. See "Business--
Regulation."
16
<PAGE>
FLUCTUATIONS IN MARKET VALUE OF LICENSES
A substantial portion of the Company's assets consists of its interests in
cellular licenses. The assignment of interests in such licenses is subject to
prior FCC approval and may also be subject to contractual restrictions, future
competition and the relative supply and demand for radio spectrum. The future
value of the Company's interests in its cellular licenses will depend
significantly upon the success of the Company's business. While there is a
current market for the Company's licenses, such market may not exist in the
future or the values obtainable may be significantly lower than at present. As
a consequence, in the event of the liquidation or sale of the Company's
assets, there can be no assurance that the proceeds would be sufficient to pay
the Company's obligations, and a significant reduction in the value of the
licenses could require a charge to the Company's results of operations.
RELIANCE ON USE OF THIRD-PARTY SERVICE MARK
The Company currently uses the registered service mark CELLULAR ONE to
market its services. While the Company's use of this service mark has
historically been governed by five-year contracts between the Company and
Cellular One Group, the owner of the service mark, the majority of these
contracts have expired. The Company is currently negotiating to renew these
contracts and in the interim has month-to-month agreements to use the service
mark. If these agreements are not renewed and the Company therefore is no
longer permitted to use the CELLULAR ONE service mark, the Company's ability
both to attract new subscribers and to retain existing subscribers could be
materially affected. In addition, if for some reason beyond the Company's
control, the name CELLULAR ONE were to suffer diminished marketing appeal, the
Company's ability both to attract new subscribers and retain existing
subscribers could be materially affected. AT&T Wireless Services, Inc., which
has been the single largest user of the CELLULAR ONE service mark, has
significantly reduced its use of the service mark as a primary service mark.
There can be no assurance that such reduction in use by AT&T Wireless will not
have an adverse effect on the marketing appeal of the brand name.
DEPENDENCE ON KEY PERSONNEL
The Company's affairs are managed by a small number of key management and
operating personnel, the loss of whom could have an adverse impact on the
Company. Robert Price, the Director of the Company and of Holdings, and a
Director, the President, Chief Executive Officer and Treasurer of PCC, also
serves as a Director and Chairman of PriCellular Corporation ("PriCellular"),
another operator of cellular telephone systems. The Company believes that Mr.
Price's positions with the Company and PriCellular complement one another and
benefit both companies because the systems they operate are similar but do not
directly compete with one another. Mr. Price's employment agreement with
PriCellular provides that he may not be an employee of or have an ownership
interest in any company engaged in the operation of cellular telephone systems
in the United States other than PriCellular and that any such other company
may not acquire any additional cellular telephone system within the United
States, in each case, without the unanimous consent of the executive committee
of the Board of Directors of PriCellular. The executive committee of the Board
of Directors of PriCellular has approved the acquisition of Palmer by PCC.
Although the Company and PriCellular historically have not imposed
inconsistent demands on Mr. Price's availability, there can be no assurances
that such conflicts will not arise in the future. Should Mr. Price's
obligations to PriCellular preclude him from devoting time to the Company for
any period, the Company believes that the other members of its existing
management can successfully manage the business affairs of the Company.
The Company expects that the executive officers of Palmer will continue as
the executive officers of the Company following the consummation of the
Acquisition with the exception of Robert G. Engelhardt, Palmer's Executive
Vice President, who is expected to retire prior to the consummation of the
Acquisition. The Company has entered into employment contracts with William J.
Ryan and M. Wayne Wisehart to remain as officers following the consummation of
the Acquisition and expects to enter into employment contracts with other key
employees prior to the consummation of the Acquisition. However, there can be
no assurance that the Company will be successful in consummating any such
contracts. The success of the Company's operations and expansion strategy
depends on its ability to retain and to expand its staff of qualified
personnel in the future.
17
<PAGE>
RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones may be linked to certain types of cancer. In
addition, recently a limited number of lawsuits have been brought, not
involving the Company, alleging a connection between cellular telephone use
and certain types of cancer. Concerns over RF emissions and interference may
have the effect of discouraging the use of cellular telephones, which could
have an adverse effect upon the Company's business. As required by the Telecom
Act, in August 1996, the FCC adopted new guidelines and methods for evaluating
RF emissions from radio equipment, including cellular telephones. While the
new guidelines impose more restrictive standards on RF emissions from low
power devices such as portable cellular telephones, the Company believes that
all cellular telephones currently marketed and in use comply with the new
standards.
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness and other obligations in connection with
the Acquisition, including the issuance of the Notes. If a court were to find
in a lawsuit by an unpaid creditor or representative of creditors of the
Company that the Company did not receive fair consideration or reasonably
equivalent value for incurring such indebtedness or obligation and, at the
time of such incurrence, the Company (i) was insolvent; (ii) was rendered
insolvent by reason of such incurrence; (iii) was engaged in a business or
transaction for which the assets remaining in the Company constituted
unreasonably small capital; or (iv) intended to incur or believed it would
incur obligations beyond its ability to pay such obligations as they mature,
such court, subject to applicable statutes of limitation, could determine to
invalidate, in whole or in part, such indebtedness and obligations as
fraudulent conveyances or subordinate such indebtedness and obligations to
existing or future creditors of the Company.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction which is being applied. Generally, however, the
Company would be considered insolvent at a particular time if the sum of its
debts was then greater than all of its property at a fair valuation or if the
present fair saleable value of its assets was then less than the amount that
would be required to pay its probable liabilities on its existing debts as
they became absolute and matured. On the basis of its historical financial
information, its recent operating history as discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other factors, the Company's management believes that, after giving effect to
indebtedness incurred in connection with the Acquisition and the other related
financings, the Company will not be rendered insolvent, it will have
sufficient capital for the businesses in which it will be engaged and it will
be able to pay its debts as they mature; however, management has not obtained
any independent opinion regarding such issues. There can be no assurance as to
what standard a court would apply in making such determinations.
EQUIPMENT FAILURE; NATURAL DISASTER
Although the Company carries "business interruption" insurance, a major
equipment failure or a natural disaster affecting any one of the Company's
central switching offices or certain of its cell sites could have a
significant adverse effect on the Company's operations.
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were issued on July 10, 1997 to a limited number of investors. The New
Notes are new securities for which there currently is no market. The Company
does not intend to apply for listing of the Notes on any securities exchange
or for quotation through the National Association of Securities Dealers
Automated Quotation System. There can be no assurance that an active trading
market for the New Notes will develop. If a trading market develops for the
New Notes, future trading prices of such securities will depend on many
factors, including prevailing interest rates, the Company's results of
operations and financial condition and the market for similar securities.
18
<PAGE>
THE ACQUISITION
The Company currently has no assets, liabilities or operations. The Company
is a wholly owned indirect subsidiary of PCC, which was incorporated in 1979,
and also of Price Communications Cellular, Inc., the original parent of
PriCellular Corporation.
On May 23, 1997, PCC, the Company and Palmer entered into an Agreement and
Plan of Merger. The Merger Agreement provides, among other things, for the
merger of the Company with and into Palmer with Palmer as the surviving
corporation. At or subsequent to the Merger, Palmer will change its name to
"Price Communications Wireless, Inc." Pursuant to the Merger Agreement, PCC
has agreed to acquire each issued and outstanding share of common stock of
Palmer for a purchase price of $17.50 per share in cash and to purchase
outstanding options and rights under employee and director stock purchase
plans for an aggregate purchase price of $488.2 million. As a result of the
Merger, the Company will assume the Palmer Existing Indebtedness. The Company
intends to refinance all of the Palmer Existing Indebtedness concurrently with
the consummation of the Merger. PCW has entered into the Fort Myers Sale
Agreement to sell, subject to certain conditions (some of which may be waived
by the parties to the Merger Agreement), including FCC approval, Palmer's Fort
Myers, Florida MSA covering approximately 382,000 Pops for $168.0 million
(which will generate approximately $166.3 million of proceeds to the Company).
The proceeds of the Fort Myers Sale will be used to fund a portion of the
acquisition of Palmer.
The consummation of the acquisition of Palmer is subject to the satisfaction
of certain conditions contained in the Merger Agreement, including, among
others, FCC and Palmer shareholder approval. All such FCC approvals have been
obtained and as of September 29, 1997, all such approvals are expected to be
final (no longer subject to administrative or court review). The Company has
received early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. In addition, PCC entered into an agreement
with PCI, which is the majority shareholder of Palmer, pursuant to which PCI
has agreed to vote its shares of common stock of Palmer in favor of the
Merger. In addition, the closing of the New Credit Facility, which will be
used in part to finance the Acquisition, will be subject to certain
significant conditions. The Company expects the Acquisition to be consummated
in October 1997; however, there can be no assurances made to that effect.
In order to fund the Acquisition and pay related fees and expenses, the
Company issued the Old Notes and will enter into the New Credit Facility,
which provides for term loan borrowings in the aggregate principal amount of
approximately $325.0 million and revolving loan borrowings of $200.0 million.
At the effective time of the Merger, the Company is expected to borrow all
term loans available thereunder and approximately $101.0 million of revolving
loans. The remaining revolving loans will, subject to a borrowing base and
other significant conditions, including the absence of any material adverse
change, be available to fund the working capital requirements of the Company.
PCC has received a commitment letter from DLJ Capital Funding, an affiliate of
DLJ, the lead Initial Purchaser, to provide the New Credit Facility, which
will be syndicated by DLJ Capital Funding. The commitment is subject to
significant conditions, including the absence of material adverse change, the
negotiation, execution and delivery of definitive documentation, consummation
of the Fort Myers Sale (or arrangements satisfactory to the lenders under the
New Credit Facility for short-term financing bridging such sale), the
repayment of the Palmer Existing Indebtedness and consummation of the Merger
and the redemption or amendment (on terms satisfactory to the lenders under
the New Credit Facility) of PCC's outstanding PIK Preferred Stock. See
"Description of New Credit Facility."
The acquisition of Palmer will be funded in part through the PCC Equity
Contribution which may be in the form of cash or common stock of Palmer. PCC
has raised $47.5 million of the purchase price for the Acquisition through an
offering by Holdings, a wholly owned indirect subsidiary of PCC and the direct
parent of the Company, of units consisting of 13 1/2% Senior Secured Discount
Notes due 2007 and warrants to purchase shares of common stock of PCC.
19
<PAGE>
Until the earlier to occur of the Special Redemption Date and the closing of
the acquisition of Palmer, the proceeds to the Company from the Offering plus
approximately $18.0 million in cash (an amount sufficient to pay principal,
premium and interest accrued through December 31, 1997) will be held by and
pledged to the Trustee pursuant to the Indenture as security for the Notes and
invested in certain Eligible Investments (as defined herein and in which the
Trustee has a valid and perfected security interest). If the acquisition of
Palmer does not occur by December 31, 1997, the Company will redeem the Notes
with the funds held by the Trustee for 101% of the principal amount thereof,
plus accrued interest to the date of redemption. See "Description of Notes--
Special Redemption." If the acquisition of Palmer occurs on or prior to the
Special Redemption Date, the Trustee will release the pledged funds to the
Company for application in connection with the closing of the acquisition of
Palmer as described under the caption "Use of Proceeds." The only conditions
to the release of the pledged funds from the secured account with the Trustee
are that (i) the Company shall have received a $128.3 million equity
contribution from PCC of cash or Palmer common stock, (ii) the Company shall
have entered into a senior loan facility syndicated by DLJ Capital Funding and
have obtained at least $325.0 million of borrowings thereunder and (iii) the
merger of the Company into Palmer shall occur concurrently with such release.
See "Risk Factors--Acquisition May Not Be Consummated or May Not Be
Consummated As Described."
20
<PAGE>
The following table sets forth the estimated sources and uses of funds for
the Acquisition and related fees and expenses:
<TABLE>
<CAPTION>
TOTAL SOURCES: (IN MILLIONS)
<S> <C>
New Credit Facility:
Term loan....................................................... $ 325.0
Revolving credit facility....................................... 101.0
Old Notes......................................................... 175.0
PCC Equity Contribution........................................... 128.3
Proceeds from Fort Myers Sale..................................... 166.3
-------
Total sources................................................. $ 895.6
=======
TOTAL USES:
Cash consideration for Palmer common stock........................ $ 488.2
Palmer Existing Indebtedness (as of June 30, 1997)................ 383.1
Estimated transaction fees and expenses........................... 23.6
Excess cash....................................................... .7
-------
Total uses.................................................... $ 895.6
=======
</TABLE>
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale. The Company has a tax planning strategy
which it believes will avoid the payment of the $56.2 million tax which would
otherwise be payable in connection with the Fort Myers Sale. While there can
be no assurances that the Company's position will prevail if challenged, the
Company has received a written opinion from a "big-six" accounting firm (other
than Arthur Andersen LLP) that, under existing laws, it is more likely than
not that the Company's position will prevail if challenged. In order to effect
this tax strategy, the partnership that owns the Fort Myers system will need
to incur approximately $169.0 million of indebtedness. The partnership has no
commitments for such financing and there can be no assurance it will be
successful in obtaining such financing.
The foregoing table also does not reflect $1.4 million which will be
immediately payable to William J. Ryan as a severance payment pursuant to his
existing employment contract upon consummation of the Acquisition and
approximately $2.6 million of severance payments which could become payable
over several years pursuant to existing employment contracts between Palmer
and its other executive officers. The Company has entered into employment
contracts with Mr. Ryan and M. Wayne Wisehart to continue as officers after
the consummation of the Acquisition and it expects to enter into employment
contracts with other key employees prior to the consummation of the
Acquisition. Except for $1.4 million payable to Mr. Ryan, there can be no
assurances as to the amount of payments that may be made to such officers, in
recognition of such severance rights, whether or not they continue with the
Company after the consummation of the Acquisition. See "Management."
21
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. The net proceeds from the sale of the Old Notes, after
deducting expenses of the Offering, are approximately $168,600,000. Such net
proceeds, together with approximately $18.0 million in cash (sufficient to pay
principal, premium and interest accrued though December 31, 1997) are
deposited with, held by and pledged to the Trustee pursuant to the Indenture
for the benefit of the Holders of the Notes. In the event that the Special
Redemption occurs, such funds will be used to fund the Special Redemption. If
the acquisition of Palmer is consummated, the net proceeds of the Offering,
together with borrowings by the Company under the New Credit Agreement, the
PCC Equity Contribution and proceeds from the Fort Myers Sale will be used to
finance the acquisition and related fees and expenses. See "Description of
Notes."
22
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Company as of June 30, 1997 on (i) an actual basis and (ii) on a pro forma
basis after giving effect to the Acquisition, the Offering and the other
transactions described herein under "Unaudited Pro Forma Condensed
Consolidated Financial Statements." This table should be read in conjunction
with the consolidated financial statements of Palmer, including the notes
thereto, the "Unaudited Pro Forma Condensed Consolidated Financial Statements"
and notes thereto, included elsewhere herein, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "The
Acquisition."
<TABLE>
<CAPTION>
AS OF JUNE 30,
1997
-----------------
(IN THOUSANDS)
ACTUAL PRO FORMA
<S> <C> <C>
Current portion of long-term debt............................ $ -- $ --
Existing long-term debt...................................... -- --
New Credit Facility.......................................... -- 426,000
11 3/4% Senior Subordinated Notes due 2007................... -- 175,000
------- --------
Total long-term debt (including current portion of long-
term debt).............................................. -- 601,000
Stockholders' equity:
Common Stock, $0.01 par value per share, 100 shares
authorized, issued and outstanding........................ -- --
Additional paid-in capital................................... -- 128,250
Retained earnings............................................ -- --
------- --------
Total stockholders' equity............................... -- 128,250
------- --------
Total capitalization..................................... $ -- $729,250
======= ========
</TABLE>
23
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet of
PCW as of June 30, 1997 gives effect to the following transactions as if they
occurred at that date and the related unaudited pro forma condensed
consolidated statements of operations for the year ended December 31, 1996 and
the six month period ended June 30, 1997 give effect to the following
transactions as if they occurred at the beginning of the relevant period:
(a) the acquisition of Palmer
(b) the Ft. Myers Sale (the proceeds of which will be used to pay Palmer
Existing Indebtedness)
(c) the issuance and sale of the Old Notes in the Offering
(d) the financing under the New Credit Facility
(e) the PCC Equity Contribution
The Acquisition will be recorded pursuant to the purchase method of
accounting.
The unaudited pro forma condensed consolidated financial statements have
been prepared by PCW's management. The unaudited pro forma data is not
designed to represent and does not represent what PCW's results of operations
or financial position would have been had the above transactions been
completed on or as of the dates assumed, and are not intended to project PCW's
results of operations for any future period or as of any future date. The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the audited and unaudited consolidated financial
statements and notes of PCC, the parent company of PCW, and the audited and
unaudited consolidated financial statements and notes of Palmer, included
elsewhere in this Prospectus.
While the Offering was consummated on July 10, 1997, the Acquisition is not
expected to be consummated prior to October 1997 and may occur as late as
December 31, 1997. Accordingly, for the three to six month period after the
closing of the Offering, and prior to the consummation of the Acquisition, the
Company will be incurring interest expense on the Notes, but will not be
entitled to any of the cash flows or earnings of Palmer.
The unaudited pro forma condensed consolidated financial statements do not
reflect this additional interest expense or the accrued liability related
thereto since the unaudited pro forma condensed consolidated statements of
operations assume that such transactions were consummated on January 1, 1996
and the unaudited pro forma condensed consolidated balance sheet assumes that
such transactions were consummated on June 30, 1997. In addition, the pro
forma condensed consolidated financial statements assume the repayment of the
$383.1 million of Palmer Existing Indebtedness and accrued interest on Palmer
Existing Indebtedness as of June 30, 1997. As a result of the Merger, the
Company will assume all Palmer Existing Indebtedness. The Company intends to
refinance all of the Palmer Existing Indebtedness concurrently with the
consummation of the Merger.
Although the unaudited pro forma condensed balance sheet reflects a $56.2
million current tax payable attributable to the Fort Myers Sale, the Company
has a tax planning strategy which it believes will avoid the payment of such
tax. While there can be no assurances that the Company's position will prevail
if challenged, the Company has received a written opinion from a "big-six"
accounting firm (other than Arthur Andersen LLP) that, under existing laws, it
is more likely than not that the Company's position will prevail if
challenged. In order to effect this tax strategy, the partnership that owns
the Fort Myers system will need to incur approximately $169.0 million of
indebtedness. The partnership has no commitments for such financing and there
can be no assurance it will be successful in obtaining such financing.
24
<PAGE>
In addition, the unaudited pro forma condensed consolidated financial
statements do not reflect $1.4 million which will be immediately payable to
William J. Ryan as a severance payment pursuant to his existing employment
contract upon consummation of the Acquisition and approximately $2.6 million
of severance payments which could become payable over several years pursuant
to existing employment contracts between Palmer and its other executive
officers. The Company has entered into employment contracts with Mr. Ryan and
M. Wayne Wisehart to continue as officers after the consummation of the
Acquisition and it expects to enter into employment contracts with other key
employees prior to the consummation of the Acquisition. Except for $1.4
million payable to Mr. Ryan, there can be no assurances as to the amount of
payments that may be made to such officers, in recognition of such severance
rights, whether or not they continue with the Company after the consummation
of the Acquisition.
25
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE THE ACQUISITION
FT. SALE OF PALMER AS AND THE RELATED PRO FORMA
PALMER MYERS FT. MYERS ADJUSTED PCW FINANCINGS PCW
-------- ------- ----------- --------- --- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.. $ 1,740 $ 45 $166,320(a) $168,015 $ $(165,745)(d) $ 2,270
Accounts receivable, net... 22,718 2,220 20,498 20,498
Inventory.................. 3,181 865 2,316 2,316
Prepaid expenses and other
current assets............ 2,774 140 2,634 2,634
-------- ------- -------- -------- --- --------- ----------
Total current assets...... 30,413 3,270 166,320 193,463 (165,745) 27,718
Property, plant and
equipment, net............. 157,596 10,909 146,687 146,687
Cellular licenses, net...... 398,845 7,408 391,437 412,444 (k) 803,881
Deferred costs, net......... 8,621 8,621 15,029 (e) 23,650
Other ...................... 1,727 84 1,643 1,643
-------- ------- -------- -------- --- --------- ----------
Total assets.............. $597,202 $21,671 $166,320 $741,851 $ $ 261,728 $1,003,579
======== ======= ======== ======== === ========= ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable and
accrued expenses ......... $ 9,032 $ 194 $ $ 8,838 $ $ $ 8,838
Notes payable.............. 2,321 2,321 (2,321)(d,i)
Current tax payable........ 56,170(b) 56,170 56,170
Other current liabilities.. 16,770 1,191 15,579 (2,787)(d,h) 12,792
-------- ------- -------- -------- --- --------- ----------
Total current liabilities.. 28,123 1,385 56,170 82,908 (5,108) 77,800
Long-term debt.............. 378,000 378,000 223,000 (f) 601,000
Deferred tax liability...... 15,326 15,326 169,102 (g) 184,428
Other long-term
liabilities................ 7,123 (4,978) 12,101 12,101
-------- ------- -------- -------- --- --------- ----------
Total liabilities......... 428,572 (3,593) 56,170 488,335 386,994 875,329
Stockholders' equity........ 168,630 25,264 110,150(c) 253,516 (125,266)(j) 128,250
-------- ------- -------- -------- --- --------- ----------
Total liabilities and
stockholders' equity...... $597,202 $21,671 $166,320 $741,851 $ $ 261,728 $1,003,579
======== ======= ======== ======== === ========= ==========
</TABLE>
26
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the PCW condensed consolidated balance sheet as of June 30,
1997, the following adjustments have been made:
<TABLE>
<C> <S> <C>
(a) CASH AND CASH EQUIVALENTS
Cash proceeds from the sale of Ft. Myers..................... $ 166,320
=========
(b) CURRENT TAX PAYABLE
Tax payable resulting from gain on sale of Ft. Myers using a
39% effective tax rate (see the discussion on page 24 of the
Company's tax planning strategy to avoid the payment of such
tax)......................................................... $ 56,170
=========
(c) STOCKHOLDERS' EQUITY
Represents the proceeds on the sale of Ft. Myers, net of
related tax payable on the gain.............................. $ 110,150
=========
(d) CASH AND CASH EQUIVALENTS
Proceeds from New Credit Facility............................ $ 426,000
Proceeds from the Offering................................... 175,000
Net equity contributed from PCC.............................. 128,250*
Cash used to acquire Palmer outstanding stock and options.... (488,237)
Cash used to retire current portion of Palmer Notes Payable.. (2,321)
Cash used to pay interest accrued through June 30, 1997 on
Palmer Existing Indebtedness................................. (2,787)
Cash used to retire Palmer Existing Indebtedness............. (378,000)
Cash used to pay estimated transaction fees and expenses..... (23,650)
---------
$(165,745)
=========
- --------
* May be contributed in either cash or common stock of Palmer. If contributed
as common stock of Palmer, the cash needed to acquire outstanding common stock
of Palmer would be reduced.
(e) DEFERRED COSTS, NET
Estimated fees and expenses in connection with the
acquisition of Palmer and the Offering....................... $ 9,650
Estimated fees and expenses in connection with the debt
financings................................................... 14,000
To write off unamortized deferred financing costs at Palmer.. (8,621)
---------
$ 15,029
=========
(f) LONG-TERM DEBT
New Credit Facility.......................................... $ 426,000
The Old Notes................................................ 175,000
Repayment of Palmer Existing Indebtedness.................... (378,000)
---------
$ 223,000
=========
(g) DEFERRED TAX LIABILITY
To record the deferred tax liability arising from the
acquisition of FCC license using a 41% effective tax rate.... $ 169,102
=========
(h) OTHER CURRENT LIABILITIES
To record the repayment of accrued interest on Palmer
Existing Indebtedness........................................ $ (2,787)
=========
(i) NOTES PAYABLE
To record the repayment of Palmer Notes Payable.............. $ (2,321)
=========
</TABLE>
27
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
(j) STOCKHOLDERS' EQUITY
To reflect PCC Equity Contribution................................................... $ 128,250
To eliminate the equity of adjusted Palmer in connection with the acquisition by PCW. (253,516)
---------
$(125,266)
=========
(k) CELLULAR LICENSES, NET
Represents the increase in cellular licenses due to the acquisition of Palmer........ $ 412,444
=========
</TABLE>
28
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE THE ACQUISITION
SALE OF PALMER AS AND THE RELATED PRO FORMA
PALMER FT. MYERS FT. MYERS ADJUSTED PCW FINANCINGS PCW
-------- --------- ----------- --------- ------ --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $159,743 $24,144 $ $135,599 $ $ $135,599
Cost and expenses:
Cost of cellular
service/operating
expenses ............. 28,717 5,441 23,276 23,276
Cost of equipment...... 17,944 2,633 15,311 15,311
Selling, general and
administrative........ 46,892 6,315 2,440 (l) 43,017 43,017
Depreciation and
amortization (loss)... 25,013 1,558 23,455 12,241 (m) 35,696
-------- ------- ------- -------- ------ -------- --------
Operating income (loss). 41,177 8,197 (2,440) 30,540 (12,241) 18,299
Other expense:
Interest expense, net.. (31,462) (300) (31,162) (27,361)(n) (58,523)
Other expense.......... (429) (63) (366) (366)
-------- ------- ------- -------- ------ -------- --------
Total other expense.. (31,891) (363) (31,528) (27,361) (58,889)
Minority interest share
of income.............. 1,880 1,880 1,880
-------- ------- ------- -------- ------ -------- --------
Income (loss) before
income tax expense..... 7,406 7,834 (2,440) (2,868) (39,602) (42,470)
Income tax expense
(benefit).............. 2,724 2,724 (4,228)(o) (1,504)
-------- ------- ------- -------- ------ -------- --------
Net income (loss)....... $ 4,682 $ 7,834 $(2,440) $ (5,592) $ $(35,374) $(40,966)
======== ======= ======= ======== ====== ======== ========
Deficiency of earnings
to fixed charges....... $ 42,470
</TABLE>
29
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE PALMER THE ACQUISITION
SALE OF AS AND THE RELATED PRO FORMA
PALMER FT. MYERS FT. MYERS ADJUSTED PCW FINANCINGS PCW
------- --------- ----------- -------- ------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $93,228 $14,266 $ $78,962 $ $ $ 78,962
Cost and expenses:
Cost of cellular
service/operating
expenses.............. 15,554 3,455 12,099 12,099
Cost of equipment...... 11,057 1,640 9,417 9,417
Selling, general and
administrative........ 27,204 3,385 1,220 (l) 25,039 25,039
Depreciation and
amortization.......... 15,129 872 14,257 6,122 (m) 20,379
------- ------- ------- ------- ------- -------- --------
Operating income (loss). 24,284 4,914 (1,220) 18,150 (6,122) 12,028
Other income (expense):
Interest income
(expense)............. (16,113) 99 (16,212) (13,127)(n) (29,339)
Other, net............. 162 162 162
------- ------- ------- ------- ------- -------- --------
Total other income
(expense)........... (15,951) 99 (16,050) (13,127) (29,177)
Minority interest share
of income.............. 782 782 782
------- ------- ------- ------- ------- -------- --------
Income (loss) before
income tax expense..... 7,551 5,013 (1,220) 1,318 (19,249) (17,931)
Income tax expense
(benefit).............. 3,851 3,851 (2,114)(o) 1,737
------- ------- ------- ------- ------- -------- --------
Net income (loss)....... $ 3,700 $ 5,013 $(1,220) $(2,533) $ $(17,135) $(19,668)
======= ======= ======= ======= ======= ======== ========
Deficiency of earnings
to fixed charges....... $ 17,931
</TABLE>
30
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the PCW condensed consolidated statements of operations for
the six months ended June 30, 1997 and the year ended December 31, 1996, the
following adjustments have been made:
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
(l) SELLING, GENERAL AND ADMINISTRATIVE
Represents a portion of the operating expenses
(including monthly management fees; property and
equipment acquisitions and expenses, central
billing expenses and central accounts payable
expenses) charged to Ft. Myers by Palmer which may
not be eliminated upon the sale of Ft. Myers...... $ 1,220 $ 2,440
======== ========
(m) DEPRECIATION AND AMORTIZATION
Represents amortization of the FCC license over 40
years............................................. $ 5,156 $ 10,311
Represents amortization of the acquisition of
Palmer and Offering costs
over 5 years...................................... 966 1,930
-------- --------
$ 6,122 $ 12,241
======== ========
(n) INTEREST EXPENSE, NET
Interest expense on $426 million of New Credit
Facility at an assumed interest rate of 8.5% per
annum*............................................ $ 18,105 $ 36,210
Interest expense on $175 million of the Notes at an
interest rate of 11.75% per annum................. 10,281 20,563
Represents current amortization expense related to
deferred debt financing costs..................... 875 1,750
Elimination of previously recorded interest (16,134) (31,162)
expense........................................... -------- --------
$ 13,127 $ 27,361
======== ========
--------
*An 1/8% change in the interest rate will increase
or decrease the interest expense per annum on the
bank debt by $533.
(o) INCOME TAX EXPENSE (BENEFIT)
To record deferred tax benefit resulting from the
amortization of the acquired FCC license.......... $ (2,114) $ (4,228)
======== ========
</TABLE>
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the periods and dates
indicated set forth below have been derived from the audited consolidated
financial statements and the unaudited condensed consolidated financial
statements of Palmer. The condensed consolidated results of operations of
Palmer for the six months ended June 30, 1996 and 1997 are unaudited and not
necessarily indicative of Palmer's results of operations for the full year.
The unaudited condensed consolidated financial data reflects all adjustments
(consisting of normal, recurring adjustments) which are, in the opinion of
management, necessary for a fair summary of Palmer's financial position,
results of operations and cash flows for and as of the end of the periods
presented.
The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Palmer's Consolidated Financial Statements and Notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ------------------
1992 1993 1994(1) 1995(2) 1996(3) 1996 1997
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue:
Service................ $ 23,017 $ 35,173 $ 61,021 $ 96,686 $151,119 $ 72,741 $ 88,140
Equipment sales and
installation.......... 4,284 6,285 7,958 8,220 8,624 4,239 5,088
--------- -------- -------- -------- -------- -------- --------
Total revenue...... 27,301 41,458 68,979 104,906 159,743 76,980 93,228
--------- -------- -------- -------- -------- -------- --------
Engineering, technical
and other direct
expenses............... 5,395 7,343 12,776 18,184 28,717 14,939 15,554
Cost of equipment....... 5,071 7,379 11,546 14,146 17,944 8,397 11,057
Selling, general and
administrative expenses. 9,458 13,886 19,757 30,990 46,892 21,977 27,204
Depreciation and
amortization........... 11,687 10,689 9,817 15,004 25,013 11,872 15,129
--------- -------- -------- -------- -------- -------- --------
Operating income (loss). (4,310) 2,161 15,083 26,582 41,177 19,795 24,284
--------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest, net.......... (8,290) (9,006) (12,715) (21,213) (31,462) (16,006) (16,113)
Other, net............. (5) (590) (70) (687) (429) (58) 162
--------- -------- -------- -------- -------- -------- --------
Total other
expense........... (8,295) (9,596) (12,785) (21,900) (31,891) (16,064) (15,951)
--------- -------- -------- -------- -------- -------- --------
Minority interest share
of (income) losses..... 377 83 (636) (1,078) (1,880) (1,023) (782)
Income taxes............ 0 0 0 (2,650) (2,724) (948) (3,851)
--------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (12,228) $ (7,352) $ 1,662 $ 954 $ 4,682 $ 1,760 $ 3,700
========= ======== ======== ======== ======== ======== ========
OTHER DATA:
Capital expenditures.... $ 3,835 $ 13,304 $ 22,541 $ 36,564 $ 41,445 $ 21,639 $ 31,700
Operating income before
depreciation and
amortization
("EBITDA")(4).......... $ 7,377 $ 12,850 $ 24,900 $ 41,586 $ 66,190 $ 31,667 $ 39,413
EBITDA margin on service
revenue................ 32.1% 36.5% 40.8% 43.0% 43.8% 43.5% 44.7%
Penetration(5).......... 2.20% 3.48% 4.58% 6.41% 7.45% 6.85% 8.29%
Subscribers at end of
period(6).............. 37,209 65,761 117,224 211,985 279,816 243,887 325,653
Cost to add a net
subscriber(7).......... $ 283 $ 203 $ 247 $ 276 $ 407 $ 375 $ 480
Average monthly service
revenue per
subscriber(8).......... $ 68.30 $ 62.69 $ 60.02 $ 56.68 $ 52.20 $ 54.05 $ 48.06
Average monthly
churn(9)............... 1.69% 1.37% 1.55% 1.55% 1.84% 1.63% 1.79%
Ratio of earnings to
fixed charges(10)...... 1.17x 1.21x 1.28x 1.22x 1.50x
CONSOLIDATED BALANCE
SHEET DATA:
Cash.................... $ 443 $ 1,670 $ 2,998 $ 3,436 $ 1,698 $ 1,372 $ 1,740
Working capital
(deficit).............. (740) 799 2,490 (1,435) 296 (8,017) 2,290
Property, plant and
equipment, net......... 17,371 23,918 51,884 100,936 132,438 118,746 157,596
Licenses and other
intangibles, net....... 103,901 114,955 199,265 332,850 387,067 357,810 409,193
Total assets............ 127,867 150,054 273,020 462,871 549,942 501,190 597,202
Total debt.............. 106,811 131,361 245,609 350,441 343,662 292,252 380,321
Stockholders' equity.... 10,659 3,244 4,915 74,553 164,930 170,608 168,630
</TABLE>
32
<PAGE>
(Footnotes from previous page)
- --------
(1) Includes the Georgia Acquisition (as defined herein), which occurred on
October 31, 1994. For the two months ended December 31, 1994, the Georgia
Acquisition resulted in revenues to Palmer of $1,803 and operating loss
of $645.
(2) Includes the GTE Acquisition (as defined herein), which occurred on
December 1, 1995. For the one month ended December 31, 1995, the GTE
Acquisition resulted in revenues to Palmer of $2,126 and operating income
of $208.
(3) Includes the acquisition of the cellular telephone systems of USCOC (as
defined herein) (Georgia-1 RSA), which occurred on June 20, 1996, and
Horizon (as defined herein) (Georgia-6 RSA), which occurred on July 5,
1996. The acquisitions of USCOC and Horizon resulted in revenues to
Palmer of $1,239 and $2,682, respectively, and operating (loss) income of
$(278) and $743, respectively, during such year.
(4) EBITDA should not be considered in isolation or as an alternative to net
income (loss), operating income (loss) or any other measure of
performance under GAAP. The Company believes that operating income before
depreciation and amortization is viewed as a relevant supplemental
measure of performance in the cellular telephone industry.
(5) Determined by dividing the aggregate number of subscribers by the
estimated population.
(6) Each billable telephone number in service represents one subscriber.
(7) Determined for a period by dividing (i) costs of sales and marketing,
including salaries, commissions and employee benefits and all expenses
incurred by sales and marketing personnel, agent commissions, credit
reference expenses, losses on cellular telephone sales, rental expenses
allocated to retail operations, net installation expenses and other
miscellaneous sales and marketing charges for such period, by (ii) the
net subscribers added during such period.
(8) Determined for a period by dividing (i) the sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period divided by the number of months in such period.
(9) Determined for a period by dividing total subscribers discontinuing
service by the average number of subscribers for such period, and
dividing that result by the number of months in such period.
(10) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before extraordinary items and accounting changes, interest
expense, taxes and a portion of rent expense representative of interest
by the sum of interest expense and a portion of rent expense
representative of interest. The ratio of earnings to fixed charges is not
meaningful for periods that result in a deficit. For the years ended
December 31, 1992 and 1993 the deficit of earnings to fixed charges was
$12,605 and $7,435, respectively.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has no assets, liabilities or operations and no recent
historical results of operations. The Company expects to have no operating
revenue prior to the Acquisition. The following is a discussion of Palmer's
historical results of operations. Palmer's historical results of operations
are not directly indicative of future results of operations because (i) they
include results attributable to Palmer's Fort Myers, Florida business unit,
which is expected to be sold in connection with the acquisition of Palmer and
(ii) they reflect a significantly less leveraged capital structure than the
Company will have upon consummation of the acquisition of Palmer. Principally
as a result of interest expense related to the financing for the Acquisition,
the Company expects to incur net losses for several years. See "The
Acquisition." This discussion should be read in conjunction with "Selected
Consolidated Financial Data," "Summary Historical and Unaudited Pro Forma
Financial and Operating Data," "Unaudited Pro Forma Condensed Consolidated
Financial Statements" and Palmer's Consolidated Financial Statements and
related notes thereto.
While the Offering was consummated on July 10, 1997, the Acquisition is not
expected to be consummated prior to October 1997 and may occur as late as
December 31, 1997. Accordingly, for the three to six month period after the
closing of the Offering and prior to the consummation of the Acquisition, the
Company will be incurring interest expense on the Notes but will not be
entitled to any of the cash flows or earnings of Palmer.
OVERVIEW OF PALMER
Palmer's revenues consist of service revenue and equipment sales and
installation. Service revenue includes access charges (generally a monthly
charge), usage charges (based upon per minute usage rates), roaming charges
(fees charged for providing services to subscribers of other cellular
telephone systems when such subscribers or "roamers" place or receive a phone
call within one of Palmer's service areas), long distance charges derived from
long distance calls placed by Palmer's subscribers and other charges,
including, among other things, connection charges for initial activation on
the cellular telephone system, and feature services such as voice mail, call
forwarding and call waiting.
GROWTH IN TOTAL REVENUES
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................ $159,743
1995............................ $104,906
1994............................ $ 68,979
1993............................ $ 41,458
1992............................ $ 27,301
</TABLE>
Palmer's revenues have grown primarily by increasing the number of its
subscribers, both by improving its penetration rate (determined by dividing
the aggregate number of subscribers by estimated population) in cellular
telephone systems owned by Palmer and by acquiring or constructing new
cellular telephone systems. Palmer's subscribers increased from 22,536 at the
beginning of 1992 to 325,653 as of June 30, 1997. During the same period,
Palmer's penetration rate in its cellular telephone systems increased from
1.45% at the beginning of 1992 to 8.3% as of June 30, 1997. Palmer also made
several acquisitions between 1992 and 1996, as later described.
On average, new subscribers use less airtime and generate less revenue per
subscriber than existing subscribers. Therefore, airtime usage and service
revenue generally do not increase proportionately with increases in numbers of
subscribers over the same period. As a result, although Palmer's total revenue
has increased each year, its average minutes of usage per subscriber and its
average monthly revenue per subscriber have decreased over time as new
subscribers have been added. The Company expects these trends to continue in
its existing cellular telephone systems as its penetration rate increases.
GROWTH IN POPULATION SERVED
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................... 3,755
1995............................... 3,307
1994............................... 2,561
1993............................... 1,890
1992............................... 1,692
</TABLE>
34
<PAGE>
The Company believes that its cost to add a net subscriber will continue to
be among the lowest in the cellular telephone industry, primarily because of
its in-house direct sales and marketing staff. Although much of the cellular
telephone industry markets through third-party agents, since 1992, Palmer has
sold its products and services almost exclusively through an internal sales
force that works principally out of retail stores in which Palmer offers a
full line of cellular telephone products and services. Palmer's shift to
nearly exclusive use of an internal sales force resulted in significant
decreases in its cost to add a net subscriber during 1992-1993. Starting in
1994, increased losses from Palmer's sales of cellular telephones caused this
downward trend in cost to add a net subscriber slowly to reverse itself. The
Company anticipates that its cost to add a net subscriber will continue to
increase but at a modest rate as savings associated with its nearly exclusive
use of an internal sales force are fully realized, while other components of
its calculation of cost to add a net subscriber continue to increase. In
addition to sales and marketing expenses, Palmer's computation of its cost to
add a net subscriber includes losses on cellular telephone sales, installation
services, credit reference services and an allocation of rental expenses
related to Palmer's retail stores.
Palmer currently has a microwave network in Alabama which connects the
Montgomery, Alabama MSA and the Alabama-8 RSA with the mobile telephone
switching office ("MTSO") in Dothan, Alabama. This microwave network connects
cellular switching equipment to cell sites without utilizing local landline
telephone carriers, thereby reducing or eliminating fees paid to landline
carriers. During 1995, Palmer spent $1.5 million to build additional microwave
connections between Dothan and Montgomery, Alabama, and between Brunswick and
Savannah, Georgia, as well as to complete a network in Fort Myers, Florida.
During 1996, Palmer spent $2.6 million to build a fiber optic network between
Dothan, Alabama and Panama City, Florida. The installation of this fiber optic
network resulted in significant savings to Palmer by the substantial reduction
or elimination of fees paid to landline carriers. In addition, this network
provides Palmer with excess capacity to lease to third parties or trade for
alternate fiber optic routes.
Prior to 1994, Palmer's customer billing was performed by a third-party
vendor. In January 1994, Palmer began performing billing functions in-house,
which significantly reduced customer service costs. The conversion to the in-
house customer billing system reduced annual billing costs per subscriber from
approximately $39 in 1993 to approximately $22 in 1994, $19 in 1995, and $19
in 1996. Since 1993, Palmer spent approximately $2.0 million in capital
expenditures for its in-house billing system. The software utilized for in-
house billing is leased from its previous third-party vendor. Therefore, no
change has occurred in billing function or operation.
MARKET OWNERSHIP
The following is a summary of the Palmer ownership interest in the cellular
telephone system in each licensed service area to which the Palmer provided
service at December 31, 1996 and June 30, 1997.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
CELLULAR SERVICE AREA 1996 1997
--------------------- ------------ --------
<S> <C> <C>
Albany, Georgia...................................... 82.7% 82.7%
Augusta, Georgia..................................... 100.0 100.0
Columbus, Georgia.................................... 84.9 85.2
Macon, Georgia....................................... 99.1 99.2
Savannah, Georgia.................................... 98.5 98.5
Dothan, Alabama...................................... 92.3 92.5
Montgomery, Alabama.................................. 91.9 92.8
Georgia 1 - RSA...................................... 100.0 100.0
Georgia 6 - RSA...................................... 94.8 95.0
Georgia 7 - RSA...................................... 100.0 100.0
Georgia 8 - RSA...................................... 100.0 100.0
Georgia 9 - RSA...................................... 100.0 100.0
Georgia 10 - RSA..................................... 100.0 100.0
Georgia 12 - RSA..................................... 100.0 100.0
Georgia 13 - RSA..................................... N/A 82.7
Alabama 8 - RSA...................................... 100.0 100.0
Fort Myers, Florida.................................. 99.0 99.0
Panama City, Florida................................. 77.9 78.4
</TABLE>
On February 1, 1997, one of Palmer's majority-owned subsidiaries acquired
the assets of and the license to operate the non-wireline cellular telephone
system serving Georgia Rural Service Area Market No. 383, otherwise known as
Georgia-13 RSA, for a total purchase price of $31.3 million.
35
<PAGE>
PALMER HISTORICAL RESULTS OF OPERATIONS
The following table sets forth the percentage which certain amounts bear to
Palmer's total revenue.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service................ 84.3% 84.8% 88.5% 92.2% 94.6% 94.5% 94.5%
Equipment sales and
installation.......... 15.7 15.2 11.5 7.8 5.4 5.5 5.5
----- ----- ----- ----- ----- -------- --------
Total revenue...... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- -------- --------
Operating Expenses:
Engineering, technical
and other direct:
Engineering and
technical (1)....... 10.3 8.8 8.1 7.6 7.9 8.2 8.2
Other direct costs of
services (2)........ 9.4 8.9 10.5 9.7 10.1 11.2 8.5
Cost of equipment (3).. 18.6 17.8 16.7 13.5 11.2 10.9 11.9
Selling, general and
administrative:
Sales and marketing
(4)................. 10.3 9.4 8.8 8.7 8.6 8.2 8.5
Customer service (5). 7.0 7.2 5.6 6.0 5.9 5.6 6.5
General and
administrative (6).. 17.4 16.9 14.2 14.9 14.9 14.8 14.2
Depreciation and
amortization.......... 42.8 25.8 14.2 14.3 15.7 15.4 16.2
----- ----- ----- ----- ----- -------- --------
Total operating
expenses.......... 115.8 94.8 78.1 74.7 74.3 74.3 74.0
----- ----- ----- ----- ----- -------- --------
Operating income (loss). (15.8)% 5.2% 21.9% 25.3% 25.7% 25.7% 26.0%
===== ===== ===== ===== ===== ======== ========
Operating income before
depreciation and
amortization (7)....... 27.0% 31.0% 36.1% 39.6% 41.4% 41.1% 42.2%
===== ===== ===== ===== ===== ======== ========
</TABLE>
- ---------------------
(1) Consists of costs of operating cellular telephone network, including
inter-trunk costs, span-line costs, cell site repairs and maintenance,
cell site utilities, cell site rent, engineers' salaries and benefits and
other operational costs.
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the costs of the cellular telephones and accessories
sold.
(4) Consists primarily of salaries and benefits of sales and marketing
personnel, employee and agent commissions and advertising and promotional
expenses.
(5) Consists primarily of salaries and benefits for customer service
personnel, costs of printing and mailing billings generated in-house in
1994, 1995, and 1996, and for the six months ended June 30, 1996 and 1997,
and fees paid to a third-party vendor of customer service billing prior to
1994.
(6) Includes salaries and benefits of general and administrative personnel and
other overhead expenses.
(7) Operating income before depreciation and amortization should not be
considered in isolation, or as an alternative to net income (loss),
operating income (loss) or any other measure of performance under
generally accepted accounting principles. Palmer believes that operating
income before depreciation and amortization is viewed as a relevant
supplemental measure of performance in the cellular telephone industry.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenue. Service revenues totaled $88.1 million for the first half of 1997,
an increase of 21.2% over $72.7 million for the first half of 1996. This
increase was primarily due to a 36.2% increase in the average number of
subscribers to 305,638 for the first half of 1997 versus 224,333 for the first
half of 1996. The increase in subscribers is the result of internal growth,
which the Company attributes primarily to its strong sales and marketing
efforts, and recent acquisitions.
Average monthly revenue per subscriber decreased 11.1% to $48.06 for the
first half of 1997 from $54.04 for the first half of 1996. This is in part due
to the trend, common in the cellular telephone industry, where, on average,
new subscribers are using less airtime than existing subscribers. Therefore,
service revenues generally do not increase proportionately with the increase
in subscribers. In addition, the decline reflects more competitive rate plans
introduced into Palmer's markets.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased by 20.0% to $5.1 million for
the first half of 1997 compared to $4.2 million for the first half of 1996.
The increase is due to the 20.7% increase in gross subscriber activations in
the first half of 1997 compared to
36
<PAGE>
1996. As a percentage of revenue, equipment sales and installation revenue
remained flat at 5.5% for the first half of 1997 and 1996.
Operating Expenses. Engineering and technical expenses increased by 21.4% to
$7.7 million for the first half of 1997 from $6.3 million in the first half of
1996, due primarily to the increase in subscribers and recent acquisitions. As
a percentage of revenue, engineering and technical expenses remained flat at
8.2% for the first half of 1997 and 1996, respectively. Palmer expects
engineering and technical expenses to decrease as a percentage of revenue due
to its large component of fixed costs. There can be no assurance, however,
that this forward-looking statement will not differ materially from actual
results due to unforeseen engineering and technical expenses.
Other direct costs of services decreased to $7.9 million for the first half
of 1997 from $8.6 million for the first half of 1996 reflecting the decrease
in interconnection costs as a result of Palmer's renegotiation of
interconnection agreements with the local exchange carriers ("LECs") in most
of the markets. As a percentage of revenue, these costs of service declined to
8.5% from 11.2%, reflecting improved interconnection agreements with LECs, as
well as efficiencies gained from the growing subscriber base.
The cost of equipment increased 31.7% to $11.0 million for the first half of
1997 from $8.4 million for the first half of 1996, due primarily to the
increase in gross subscriber activations for the same period. The equipment
sales margin decreased to (117.3%) for the first half of 1997 from (98.1%) for
the first half of 1996. In an effort to address market competition and improve
market share, Palmer sold more telephones below cost in the first half of
1997, on average, than in the same period of 1996.
Sales and marketing costs increased 26.2% to $8.0 million for the first half
of 1997 from $6.3 million for the same period in 1996. This increase is
primarily due to the 20.7% increase in gross subscriber activations and the
resulting increase in commissions. As a percentage of total revenue, sales and
marketing costs increased to 8.5% from 8.2% for the first half of 1997 and
1996, respectively. Palmer's cost to add a net subscriber, including loss on
telephone sales, increased to $480 for the first half of 1997 from $375 for
the first half of 1996. This increase in cost to add a net subscriber was
caused primarily by increased losses from Palmer's sales of cellular
telephones and an increase in commissions and advertising costs.
Customer service costs increased 41.3% to $6.0 million for the first half of
1997 from $4.2 million for the first half of 1996. As a percentage of revenue,
customer service costs increased to 6.5% from 5.6% for the first half of 1997
and 1996, respectively. The increase was due primarily to higher costs for
billing support services.
General and administrative expenditures increased 15.8% to $13.2 million for
the first half of 1997 from $11.4 million for the first half of 1996, due
primarily to the increase in the costs associated with supporting recent
acquisitions. General and administrative expenses decreased as a percentage of
revenue to 14.2% in the first half of 1997 from 14.8% in the first half of
1996. As Palmer continues to add more subscribers, and generates associated
revenue, general and administrative expenses should decrease as a percentage
of total revenues. There can be no assurance, however, that this forward-
looking statement will not differ materially from actual results due to
unforseen general and administrative expenses and other factors.
Depreciation and amortization increased 27.4% to $15.1 million for the first
half of 1997 from $11.9 million for the first half of 1996. This increase was
primarily due to the depreciation and amortization associated with recent
acquisitions and additional capital expenditures. As a percentage of revenue,
depreciation and amortization increased to 16.2% from 15.4% for the first half
of 1997 and 1996, respectively.
Operating income increased 22.7% to $24.3 million in the first half of 1997,
from $19.8 million for the first half of 1996. This improvement in operating
results is attributable primarily to increases in revenue which exceeded
increases in operating expenses.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
remained relatively flat at $16.1 million and $16.0 million for the first half
of 1997 and 1996, respectively.
37
<PAGE>
Income tax expense was $3.9 million in the first half of 1997 and $0.9
million in the first half of 1996. This increase is due primarily to the
increase in income before income taxes in 1997 and the fact that all remaining
net operating loss carry forwards were recognized for financial statement
purposes in 1996.
Net income for the first half of 1997 was $3.7 million, or $0.13 per share,
compared to net income of $1.8 million, or $0.07 per share, for the first half
of 1996. The increase in net income is primarily attributable to increases in
revenue which exceeded increases in operating expenses and income tax expense.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue. Service revenue totaled $151.1 million for 1996, an increase of
$54.4 million or 56.3% over $96.7 million for 1995. This increase was due
primarily to a 69.7% increase in the average number of subscribers to 241,255
in 1996 from 142,147 in 1995. The increase in subscribers is the result of
internal growth, which Palmer attributes primarily to its sales and marketing
efforts, and recent acquisitions. The GTE Acquisition (as defined herein)
accounted for 41,163 subscribers at December 31, 1996. Service revenue
attributable to the cellular telephone systems acquired in the GTE Acquisition
totaled $24.6 million for 1996 as compared to $2.0 million for the one month
ended December 31, 1995.
Average monthly service revenue per subscriber decreased to $52.20 for 1996
from $56.68 for 1995. This decrease occurred because, on average, new
subscribers use less airtime and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, airtime usage and service revenue did not increase in proportion to
the increase in subscribers. In addition, Palmer entered into revised roaming
agreements with certain of its neighboring carriers. These agreements provide
for reciprocal lower roaming rates per minute of use. This resulted in lower
roaming revenue for Palmer, but also resulted in offsetting lower direct costs
of services when Palmer's subscribers were roaming on these neighboring
systems.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased to $8.6 million for 1996 from
$8.2 million for 1995, a 4.9% increase, due primarily to the increase in gross
subscriber activations offset by lower cellular phone prices. While equipment
sales and installation revenue increased slightly for 1996 from 1995, it
decreased as a percentage of total cellular revenue to 5.4% for 1996 from 7.8%
for 1995, reflecting the increased annual revenue base as well as lower
cellular equipment prices charged to customers. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the GTE Acquisition totaled $ 1.0 million for 1996 as compared to $0.1
million for the one month ended December 31, 1995.
Operating Expenses. Engineering and technical expenses increased by 57.5% to
$12.6 million for 1996 from $8.0 million for 1995, due primarily to the
increase in the number of subscribers. As a percentage of revenue, engineering
and technical expenses increased to 7.9% for 1996 from 7.6% for 1995 due to
additional costs incurred for the recent acquisitions and recurring costs
associated with Palmer's system development and expansion. Such development is
done for the purpose of increasing capacity and improving coverage.
Engineering and technical expenses attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $2.8 million for 1996 as
compared to $0.2 million for the one month ended December 31, 1995.
Other direct costs of services increased 58.3% to $16.1 million for 1996
from $10.2 million for 1995. As a percentage of revenue, other direct costs of
services increased to 10.1% for 1996 from 9.7% for 1995. This increase in
other direct costs of services as a percentage of revenue was due primarily to
Palmer subsidizing more roaming costs for competitive reasons. Other direct
costs of service attributable to the cellular telephone systems acquired in
the GTE Acquisition totaled $1.6 million for 1996 as compared to $0.2 million
for the one month ended December 31, 1995.
Cost of equipment increased 26.8% to $17.9 million for 1996 from $14.1
million for 1995, due primarily to the increase in gross subscriber
activations for the same period. The equipment sales margin decreased to
(108.1%) for 1996 from (72.1%) for 1995. In an effort to address market
competition and improve market share,
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Palmer sold more telephones below cost in 1996 than in 1995. The cost of
equipment attributable to the cellular telephone systems acquired in the GTE
Acquisition totaled $3.1 million for 1996 as compared to $0.2 million for the
one month ended December 31, 1995.
Sales and marketing costs increased 50.2% to $13.7 million for 1996 from
$9.1 million for 1995. This increase is primarily due to the 28.1% increase in
gross subscriber activations and the resulting increase in salaries and
commissions. Sales and marketing costs as a percentage of total revenue
remained relatively flat at 8.6% for 1996 and 8.7% for 1995. Palmer's cost to
add a net subscriber, including losses on cellular telephone sales, increased
to $407 for 1996 from $276 for 1995. This increase in cost to add a net
subscriber was caused primarily by additional advertising and fixed marketing
overhead associated with the systems acquired in the GTE Acquisition, which
are not yet generating the offsetting gains in net subscribers. In addition,
there were increased losses from Palmer's sales of cellular telephones. Sales
and marketing costs attributable to the cellular telephone systems acquired in
the GTE Acquisition totaled $2.8 million in 1996 as compared to $0.2 million
for the one month ended December 31, 1995.
MONTHLY CASH OPERATING COSTS PER SUBSCRIBER
<TABLE>
<S> <C>
1996................................. $29
1995................................. $32
1994................................. $36
1993................................. $40
1992................................. $48
</TABLE>
Customer service costs increased 49.9% to $9.4 million for 1996 from $6.3
million for 1995. As a percentage of revenue, customer service costs remained
relatively flat at 5.9% and 6.0% for 1996 and 1995, respectively. Customer
service costs attributable to the cellular telephone systems acquired in the
GTE Acquisition totaled $1.9 million in 1996 as compared to $0.2 million for
the one month ended December 31, 1995.
General and administrative expenses increased 52.5% to $23.8 million for
1996 from $15.6 million for 1995 and remained flat as a percentage of revenue
at 14.9% for 1996 and 1995. As the Company continues to add more subscribers
and generate associated revenue, general and administrative expenses should
decrease as a percentage of total revenues. The general and administrative
costs attributable to the cellular telephone systems acquired in the GTE
Acquisition totaled $3.4 million for 1996 as compared to $0.4 million for the
one month ended December 31, 1995.
Depreciation and amortization increased 66.7% to $25.0 million for 1996 from
$15.0 million for 1995. This increase is primarily due to the depreciation and
amortization associated with the recent acquisitions and additional capital
expenditures. Depreciation and amortization attributable to the cellular
telephone systems acquired in the GTE Acquisition totaled $6.2 million for
1996 as compared to $0.5 million for the one month ended December 31, 1995.
Operating income for 1996 increased 54.9% to $41.2 million, an increase of
$14.6 million over operating income for 1995. This improvement in operating
results is attributed primarily to increases in revenue which exceeded
increases in operating expenses. Operating income attributable to the cellular
telephone systems acquired in the GTE Acquisition totaled $3.8 million for
1996 as compared to $0.2 million for the one month ended December 31, 1995.
EBITDA
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................. $66,190
1995............................. $41,586
1994............................. $24,900
1993............................. $12,850
1992............................. $ 7,377
</TABLE>
39
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue. Service revenue totaled $96.7 million for 1995, an increase of
$35.7 million or 58.4% over $61.0 million for 1994. This increase was due
primarily to a 67.8% increase in the average number of subscribers to 142,147
in 1995 from 84,718 in 1994. The increase in subscribers was the result of
internal growth, which Palmer attributes primarily to its sales and marketing
efforts, the Georgia Acquisition (as defined herein) and the GTE Acquisition
(as defined herein). During 1995, Palmer added 13,098 net subscribers in the
Georgia Acquisition, bringing the total subscribers served by those systems to
25,238 at December 31, 1995. Service revenue attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $12.3 million
for 1995 as compared to $1.6 million for the two months ended December 31,
1994. The GTE Acquisition increased Palmer's subscribers by 34,904 at December
31, 1995. Service revenue attributable to the cellular telephone systems
acquired in the GTE Acquisition totaled $2.0 million for the one month ended
December 31, 1995, and is included in Palmer's 1995 results of operations.
Average monthly service revenue per subscriber decreased to $56.68 for 1995
from $60.02 for 1994. This decrease occurred because, on average, new
subscribers use less airtime and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, airtime usage and service revenue did not increase in proportion to
the increase in subscribers.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased to $8.2 million for 1995 from
$8.0 million for 1994, a 3.3% increase, due primarily to the increase in
subscriber activations offset by lower cellular phone prices. While equipment
sales and installation revenue increased slightly for 1995 from 1994, it
decreased as a percentage of total cellular revenue to 7.8% for 1995 from
11.5% for 1994, reflecting the increased recurring annual revenue base as well
as lower cellular equipment prices charged to customers. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the Georgia Acquisition totaled $1.1 million for 1995 as compared to $0.2
million for the two months ended December 31, 1994. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the GTE Acquisition totaled $0.1 million for the one month ended December
31, 1995 and is included in Palmer's results of operations for 1995.
Operating Expenses. Engineering and technical expenses increased by 43.2% to
$8.0 million for 1995 from $5.6 million for 1994, due primarily to the
increase in subscribers. As a percentage of revenue, engineering and technical
expenses decreased to 7.6% for 1995 from 8.1% for 1994. Engineering and
technical expenses attributable to the cellular telephone systems acquired in
the Georgia Acquisition totaled $2.4 million for 1995 as compared to $0.3
million for the two months ended December 31, 1994. Engineering and technical
expenses attributable to the cellular telephone systems acquired in the GTE
Acquisition totaled $0.2 million for the one month ended December 31, 1995 and
are included in Palmer's results of operations for 1995.
Other direct costs of services increased 41.7% to $10.2 million for 1995
from $7.2 million for 1994. As a percentage of revenue, other direct costs of
services decreased to 9.7% for 1995 from 10.5% for 1994. This decrease in
other direct costs of services as a percentage of revenue was due primarily to
Palmer improving its roaming agreements with neighboring cellular service
providers, spreading its fixed charges over a larger revenue base, and
bringing its intramarket roaming settlements in-house. Other direct costs of
service attributable to the cellular telephone systems acquired in the Georgia
Acquisition totaled $1.1 million for 1995 as compared to $0.2 million for the
two months ended December 31, 1994. Other direct costs of service attributable
to the cellular telephone systems acquired in the GTE Acquisition totaled $0.2
million for the one month ended December 31, 1995 and are included in Palmer's
results of operations for 1995.
Cost of equipment increased 22.5% to $14.1 million for 1995 from $11.5
million for 1994, due primarily to the increase in gross subscriber
activations for the same period. The equipment sales margin decreased to
(72.1%) for 1995 from (45.1%) for 1994. In an effort to address market
competition and improve market share, Palmer sold more telephones below cost
in 1995 than in 1994. The cost of equipment attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $2.4 million for
1995 as compared to $0.3 million for the two months ended December 31, 1994.
The cost of equipment attributable to the cellular telephone
40
<PAGE>
systems acquired in the GTE Acquisition totaled $0.2 million for the one month
ended December 31, 1995 and is included in Palmer's results of operations for
1995.
Sales and marketing costs increased 51.5% to $9.1 million for 1995 from $6.0
million for 1994. This increase is primarily due to the 49.1% increase in
gross subscriber activations and the resulting increase in salaries and
commissions. Sales and marketing costs as a percentage of total revenue
remained relatively flat at 8.7% for 1995 and 8.8% for 1994. Palmer's cost to
add a net subscriber, including losses on cellular telephone sales, increased
to $276 for 1995 from $247 for 1994. This increase in cost to add a net
subscriber was caused primarily by increased losses from Palmer's sales of
cellular telephones. Sales and marketing costs attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $1.7 million for
1995 as compared to $0.3 million for the two months ended December 31, 1994.
Sales and marketing costs attributable to the cellular telephone systems
acquired in the GTE Acquisition totaled $0.2 million for the one month ended
December 31, 1995 and are included in Palmer's results of operations for 1995.
Customer service costs increased 62.0% to $6.3 million for 1995 from $3.9
million for 1994 and increased as a percentage of total revenue to 6.0% for
1995 from 5.6% for 1994. This increase is primarily due to an increase in
subscribers, to operating costs associated with the newly established regional
customer service call centers in Montgomery, Alabama and Savannah, Georgia and
to non-recurring expenditures incurred in connection with the implementation
of new area codes in Palmer's Alabama and Fort Myers, Florida service areas.
Customer service costs attributable to the cellular telephone systems acquired
in the Georgia Acquisition totaled $0.9 million for 1995 as compared to $0.2
million for the two months ended December 31, 1994. Customer service costs
attributable to the cellular telephone systems acquired in the GTE Acquisition
totaled $0.2 million for the one month ended December 31, 1995 and are
included in Palmer's results of operations for 1995.
General and administrative expenses increased 58.2% to $15.6 million for
1995 from $9.8 million for 1994 and increased as a percentage of total revenue
to 14.9% for 1995 from 14.2% for 1994 due primarily to the increase in the
number of subscribers, as well as the Georgia and GTE Acquisitions. Fixed
general and administrative costs attributable to the acquisitions are incurred
prior to the development of the subscriber base and the generation of
associated revenue. As the Company continues to add more subscribers and
generate associated revenue, general and administrative expenses should
decrease as a percentage of total revenues. The general and administrative
costs attributable to the cellular telephone systems acquired in the Georgia
Acquisition totaled $3.2 million for 1995 as compared to $0.4 million for the
two months ended December 31, 1994. The general and administrative costs
attributable to the cellular telephone systems acquired in the GTE Acquisition
totaled $0.4 million for the one month ended December 31, 1995 and are
included in Palmer's results of operations for 1995.
Depreciation and amortization increased 52.8% to $15.0 million for 1995 from
$9.8 million for 1994. This increase is primarily due to the depreciation and
amortization associated with the acquisitions and additional capital
expenditures. Depreciation and amortization attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $3.6 million for
1995 as compared to the $0.7 million for the two months ended December 31,
1994. Depreciation and amortization attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $0.5 million for the one month
ended December 31, 1995 and are included in Palmer's results of operations for
1995.
Operating income for 1995 increased 76.2% to $26.6 million, an increase of
$11.5 million over operating income for 1994. This improvement in operating
results is attributed primarily to increases in revenue which exceeded
increases in operating expenses. Operating income (loss) attributable to the
cellular telephone systems acquired in the Georgia Acquisition totaled $(2.0)
million for 1995 as compared to $(0.6) million for the two months ended
December 31, 1994. Operating income attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $0.2 million for the one month
ended December 31, 1995 and is included in Palmer's results of operations for
1995.
41
<PAGE>
NET INTEREST EXPENSE, OTHER EXPENSE, INCOME TAX EXPENSE, AND NET INCOME
Net interest expense increased 48.3% to $31.5 million for 1996 from $21.2
million for 1995 due primarily to debt incurred for the recent acquisitions
and the amortization of deferred financing fees related to Palmer's credit
facility. For 1995, net interest expense increased 66.8% to $21.2 million from
$12.7 million for 1994 due primarily to debt incurred for the Georgia
Acquisition and the GTE Acquisition, the amortization of deferred financing
fees related to Palmer's credit facility and increased interest rates.
Other expense was $0.4 million in 1996, $0.7 million in 1995 and $0.1
million in 1994. Other expense consists primarily of the disposal of certain
assets by Palmer and other non-operating expenses.
Income tax expense was $2.7 million for both 1996 and 1995 compared to none
in 1994. The $2.7 million income tax expense in 1995 was a non-recurring
deferred income tax charge related to the difference between the financial
statement and income tax return bases of certain assets and liabilities of
Palmer Cellular Partnership (the "Partnership"), predecessor of Palmer. In
connection with Palmer's initial public offering of securities in March, 1995,
all of the assets and liabilities of the Partnership were exchanged for stock
in Palmer. Due to the exchange, a deferred tax liability was recorded to
reflect the difference between the financial statement and income tax return
bases in these assets and liabilities. See notes 2 and 5 to Palmer's
consolidated financial statements.
Net income for 1996 was $4.7 million, or $0.18 per share of common stock,
compared to net income of $1.0 million, or $0.04 per share of common stock for
1995. The increase in net income is primarily attributable to increases in
revenue which exceeded increases in expenses. Net income for 1994 was $1.7
million, or $0.09 per share of common stock. The decrease in net income
between 1995 and 1994 is primarily attributable to interest expense on debt
incurred for the Georgia Acquisition and the GTE Acquisition, and income tax
expense.
LIQUIDITY AND CAPITAL RESOURCES
Following the Acquisition, the Company's principal sources of liquidity are
expected to be cash flow from operations and borrowings under the New Credit
Facility. The Company's principal uses of cash will be debt service
requirements, capital expenditures and working capital.
The Company will incur substantial indebtedness in connection with the
Acquisition. On a pro forma basis, after giving effect to the Acquisition, the
Company would have had approximately $601 million of indebtedness outstanding
as of June 30, 1997 and its ratio of EBITDA to interest expense would have
been 0.92 to 1.00 and 1.10 to 1.00 for the year ended December 31, 1996 and
the six months ended June 30, 1997.
Palmer's long-term capital requirements consist of funds for capital
expenditures, acquisition and debt service. Historically, Palmer met its
capital requirements primarily through equity contributions, bank and
intercompany debt and, to a lesser extent, through operating cash flow. The
Company expects to meet its capital requirements following the Acquisition
from cash from operations and borrowings under the New Credit Facility. Upon
consummation of the Acquisition, the Company's only committed source of
liquidity is expected to be the New Credit Facility. While the Company expects
to have sufficient availability under the New Credit Facility to meet its
liquidity needs, the terms of the New Credit Facility which determine the
availability thereunder are still under negotiation. The Company intends to
use the availability under the New Credit Facility for general corporate
purposes and, if the Company's tax planning strategy is unsuccessful, to
finance the $56.2 million tax payment due with respect to the Fort Myers Sale.
There can be no assurances, however, that the New Credit Facility will be
entered into. In addition, borrowings under the New Credit Facility will be
subject to significant conditions, including compliance with certain financial
ratios and the absence of any material adverse change. For a description of
the New Credit Facility, including a description of the interest rates
applicable to borrowings thereunder and repayment schedule, see "Description
of New Credit Facility."
In 1996, Palmer spent approximately $41.4 million for capital expenditures.
The Company expects to spend $50 million and $25 million to $30 million for
capital expenditures for the years ended December 31, 1997 and 1998,
respectively. The Company expects to use net cash provided by operating
activities and borrowings available under the New Credit Facility to fund such
capital expenditures.
42
<PAGE>
OTHER
Pursuant to the Merger Agreement, PCC intends to acquire all issued and
outstanding shares of common stock of Palmer and outstanding options and
rights under employee and director stock purchase plans for a purchase price
of $17.50 per share in cash.
Following the Merger, the common stock of Palmer will cease to be authorized
to be quoted on the NASDAQ Stock Market and will become eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934 (the "Exchange Act").
ACCOUNTING POLICIES
For financial reporting purposes, Palmer reports 100% of revenues and
expenses for the markets for which it provides cellular telephone service.
However, in several of its markets, Palmer holds less than 100% of the equity
ownership. The minority stockholders' and partners' shares of income or losses
in those markets are reflected in the consolidated financial statements as
"minority interest share of (income) losses," except for losses in excess of
their capital accounts and cash call provisions which are not eliminated in
consolidation. For financial reporting purposes, Palmer consolidates each
subsidiary and partnership in which it has a controlling interest (greater
than 50.0%). From 1992 through 1996, Palmer had controlling interests in each
of its subsidiaries and partnerships.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
43
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1997; provided, however, that if the Company,
in its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $175,000,000 aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date set forth on the cover
page to all Holders of Old Notes at the addresses set forth in the security
register with respect to Old Notes maintained by the Trustee. The Company's
obligations to accept Old Notes for exchange pursuant to the Exchange Offer is
subject to certain conditions as set forth under "Certain Conditions to the
Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of any Old Notes, by giving oral or written notice of
such extension to the Exchange Agent and notice of such extension to the
Holders as described below. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the Holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to
tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to Bank of Montreal
Trust Company (the "Exchange Agent") at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(The "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
44
<PAGE>
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than the person signing the Letter of Transmittal, the Old Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right in its
sole discretion to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any Holder
who seeks to tender Old Notes in the Exchange Offer). The interpretation of
the terms and conditions of the Exchange Offer as to any particular Old Notes
either before or after the Expiration Date (including the Letter of
Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with the tenders of Old Notes for exchange must be cured within
such reasonable period of time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Notes for exchange, nor shall any of them incur any liability for failure
to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by
the Company, proper evidence satisfactory to the Company of its authority to
so act must be submitted.
By tendering, each Holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, (ii) neither the Holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the Holder is not
a broker-dealer, or is a broker-dealer but will not receive New Notes for its
own account in exchange for Old Notes, neither the Holder nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the Holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company. If the
tendering Holder is a broker-dealer that
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<PAGE>
will receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted
for any reason set forth in the terms and conditions of the Exchange Offer or
if certificates representing Old Notes are submitted for a greater principal
amount than the Holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering Holder thereof
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of
the Exchange Offer.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from July 10, 1997, payable semiannually on
January 15 and July 15 of each year, commencing on January 15, 1998, at the
rate of 11 3/4% per annum. Holders of Old Notes whose Old Notes are accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of interest on the Old Notes accrued from July 10, 1997 until the date
of the issuance of the New Notes. Consequently, Holders who exchange their Old
Notes for New Notes will receive the same interest payment on January 15, 1998
(the first interest payment date with respect to the Old Notes and the New
Notes) that they would have received had they not accepted the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's
systems may make book-entry delivery of Old Notes by causing the Book-Entry
Transfer Facility to transfer such Old Notes into the Exchange Agent's account
in accordance with the Book-Entry Transfer Facility's Automated Tender Offer
Program ("ATOP") procedures for transfer. However, the exchange for the Old
Notes so tendered will only be made after timely confirmation of such book-
entry transfer of Old Notes into the Exchange Agent's account, and timely
receipt by the Exchange Agent of an Agent's Message (as such term is defined
in the next sentence) and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from a participant tendering
Old Notes that are the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that the Company may enforce such agreement against such
participant.
46
<PAGE>
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates of all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes
to be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of
the particular certificates to be withdrawn and a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any note of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the acceptance of such Old Notes for exchange or the
exchange of the New Notes for such Old Notes, such acceptance or issuance
would violate applicable law or any interpretation of the staff of the SEC.
47
<PAGE>
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "TIA").
EXCHANGE AGENT
Bank of Montreal Trust Company has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver To:
Bank of Montreal Trust Company, Exchange Agent
By Mail, by Overnight Courier or By Hand:
77 Water Street, 4th Floor
New York, New York 10005
Attention: Amy Roberts
Corporate Trust Department
By Facsimile:
(212) 701-7684
Confirm by Telephone:
(212) 701-7653
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Company and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders. The Company will not make any payment to brokers, dealers,
or others soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$200,000.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that Holders who instruct
the Company to register New Notes in the name of, or
48
<PAGE>
request that Old Notes not tendered or not accepted in the Exchange Offer to
be returned to, a person other than the registered tendering Holder will be
responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
The Company believes that, based upon interpretations contained in letters
issued to third parties by the staff of the SEC, New Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
or otherwise transferred by each Holder thereof (other than a broker-dealer,
as set forth below, and any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of such
Holder's business and such Holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. If any Holder has
any arrangement or understanding with respect to the distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not
rely on the applicable interpretations of the staff of the SEC and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any such
jurisdiction.
49
<PAGE>
BUSINESS
GENERAL
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. At
June 30, 1997, after giving effect to the Acquisition, PCW provided cellular
telephone service to 287,665 subscribers in Georgia, Alabama, Florida and
South Carolina in a total of 17 licensed service areas composed of eight MSAs
and nine RSAs, with an aggregate estimated population of 3.5 million. PCW
sells its cellular telephone service as well as a full line of cellular
products and accessories principally through its network of retail stores. PCW
markets all of its products and services under the nationally recognized
service mark CELLULAR ONE. All information in this section gives effect to the
Acquisition.
MARKETS AND SYSTEMS
The Company's cellular telephone systems serve contiguous licensed service
areas in Georgia, Alabama and South Carolina. PCW also has cellular service
areas in Georgia-1 RSA and Panama City, Florida. The following table sets
forth on a pro forma basis after giving effect to the Acquisition as of July
18, 1997, with respect to each service area in which PCW owns a cellular
telephone system, the estimated population, PCW's beneficial ownership
percentage, the Net Pops and the date of initial operation of such system by
Palmer or a predecessor operator.
<TABLE>
<CAPTION>
ESTIMATED DATE SYSTEM
SERVICE AREA(1) POPULATION(2) PERCENTAGE NET POPS OPERATIONAL
<S> <C> <C> <C> <C>
Albany, GA.................... 118,527 82.7% 98,061 4/88
Augusta, GA................... 439,116 100.0 439,116 4/87
Columbus, GA.................. 254,150 85.2 216,518 11/88
Macon, GA..................... 313,686 99.2 311,234 12/88
Savannah, GA.................. 283,878 98.5 279,578 3/88
Georgia-1 RSA................. 223,098 100.0 223,098 10/92
Georgia-6 RSA................. 199,516 95.0 189,560 4/93
Georgia-7 RSA................. 134,376 100.0 134,376 10/91
Georgia-8 RSA................. 157,451 100.0 157,451 10/91
Georgia-9 RSA................. 119,410 100.0 119,410 9/92
Georgia-10 RSA................ 149,699 100.0 149,699 10/91
Georgia-12 RSA................ 211,799 100.0 211,799 10/91
Georgia-13 RSA................ 147,392 82.7 121,942 10/90
Dothan, AL.................... 136,160 94.4 128,535 2/89
Montgomery, AL................ 318,371 92.8 295,430 8/88
Alabama-8 RSA................. 173,993 100.0 173,993 7/93
--------- ---------
Subtotal.................... 3,378,622 3,247,800
--------- ---------
Panama City, FL............... 146,018 78.4 114,493 9/88
--------- ---------
Total....................... 3,524,640 3,362,293
========= =========
</TABLE>
- --------
(1) Does not include the Alabama-5 RSA, South Carolina-7 RSA and South
Carolina-8 RSA where PCW has IOA. PCW has no subscribers in the South
Carolina-7 RSA and South Carolina-8 RSA, but instead provides roaming access
to its own subscribers and others when they travel in these two service
areas, utilizing its existing cell sites. Construction permits were granted
to Permittees for the Alabama-5 RSA and South Carolina-8 RSA on May 20,
1997. The Permittees are required to complete construction of their
respective RSA within 18 months. After completing construction, a Permittee
may give the Company ten days prior written notice, at which point the
Company would be required to sell its subscribers to the Permittee at cost.
The application for a construction permit for the South Carolina-7 RSA has
been remanded by the FCC to the Wireless Bureau for further review.
(2) Based on population estimates for 1996 from the 1996 Donnelley Market
Information Service.
50
<PAGE>
GEORGIA/ALABAMA
In 1988, PCW acquired controlling interests in the licenses to operate
cellular telephone systems in the four MSAs (Montgomery and Dothan, Alabama
and Columbus and Albany, Georgia) that make up the core of its Georgia/Alabama
cluster. The Company continued to increase its presence in this market by
acquiring additional cellular service areas in 1989 (Macon, Georgia MSA), 1992
(Georgia-9 RSA), 1993 (Alabama-8 RSA), 1994 (Georgia-7 RSA, Georgia-8 RSA,
Georgia-10 RSA and Georgia-12 RSA), 1995 (Savannah, Georgia MSA and Augusta,
Georgia MSA) and 1996 (Georgia-1 RSA and Georgia-6 RSA). The Augusta, Georgia
MSA includes Aiken County in South Carolina. In 1994, PCW also received
interim operating authority from the FCC to provide service in two counties
within the southern portion of the Alabama-5 RSA. In 1995, as a result of the
GTE Acquisition, PCW received interim operating authority from the FCC to
provide service to South Carolina-7 RSA and South Carolina-8 RSA. In the
aggregate, this market (excluding the Alabama-5 RSA, South Carolina-7 RSA and
South Carolina-8 RSA where PCW has only interim operating authority) now
covers a contiguous service area of approximately 38,000 square miles that
includes Montgomery, the state capital of Alabama, prominent resort
destinations in Jekyll Island, St. Simons Island and Sea Island, Georgia, and
over 710 miles of interstate highway, including most of I-95 from Savannah,
Georgia to Jacksonville, Florida. The Company collects substantial roaming
revenue from cellular telephone subscribers from other systems traveling in
this market from nearby population centers such as Atlanta and Birmingham, as
well as from vacation and business traffic in the southeastern United States.
Due in part to the favorable labor environment, moderate weather and
relatively low cost of land, during the last several years there has been an
influx of new manufacturing plants in this market. As of December 31, 1996,
PCW utilized 181 cell sites in this cluster (including three cell sites in
Alabama-5 RSA), 23 of which were constructed by PCW in 1995 and 43 of which
were placed in service in 1996.
PANAMA CITY
The Company acquired control of the non-wireline cellular license for the
Panama City, Florida market in 1991. PCW collects substantial roaming revenue
in this market from subscribers from other systems who visit Panama City, a
popular spring and summer vacation destination. As of December 31, 1996, PCW
utilized 11 cell sites in this market. In 1997, the Company plans to add two
additional cell sites in this market.
OPERATIONS
General
The Company has concentrated its efforts on creating an integrated network
of cellular telephone systems in the southeastern United States, principally
to date in Georgia, Alabama, Florida and South Carolina. At June 30, 1997,
after giving effect to the Acquisition, PCW provided cellular telephone
service to 287,665 subscribers in a total of 17 licensed service areas
composed of eight MSAs and nine RSAs. The Company also participates in the
NACN, a nationwide consortium of non-wireline cellular telephone companies,
with the goal of providing seamless regional and national cellular telephone
service to its subscribers. Participation in the NACN allows seven-digit
dialing access to PCW's subscribers when they travel outside PCW's service
areas, providing them with convenient call delivery throughout large areas of
the United States, Canada, Mexico and Puerto Rico served by other NACN
participants.
51
<PAGE>
The following table sets forth information, at the dates indicated after
giving effect to the Acquisition, regarding PCW's subscribers, penetration
rate, cost to add a net subscriber, average monthly churn rate and average
monthly service revenue per subscriber.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- --------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Subscribers at end of period (1)... 29,869 54,382 99,626 187,870 245,396 287,665
Penetration at end of period (2)... 2.23% 3.57% 4.54% 6.41% 7.28% 8.12%
Cost to add a net subscriber (3)... $ 272 $ 198 $ 247 $ 275 $ 434 $ 477
Average monthly churn (4).......... 1.58% 1.32% 1.54% 1.51% 1.89% 1.78%
Average monthly service revenue per
subscriber (5).................... $ 59.65 $ 56.70 $ 56.54 $ 53.80 $ 50.37 $ 46.20
</TABLE>
- ---------------------
(1) Each billable telephone number in service represents one subscriber.
Amounts at December 31, 1992 and 1993 include 955 and 2,576 subscribers,
respectively, in the Alabama-7 RSA where the Company had interim operating
authority from June 1991 through July 1994.
(2) Determined by dividing the aggregate number of subscribers by the
estimated population.
(3) Determined for the periods, by dividing (i) all costs of sales and
marketing, including salaries, commissions and employee benefits and all
expenses incurred by sales and marketing personnel, agent commissions,
credit reference expenses, losses on cellular telephone sales, rental
expenses allocated to retail operations, net installation expenses and
other miscellaneous sales and marketing charges for such period including
fees paid for use of the CELLULAR ONE service mark, by (ii) the net
subscribers added during such period.
(4) Determined for the periods, by dividing total subscribers discontinuing
service by the average number of subscribers for such period , and divided
by the number of months in the relevant period.
(5) Determined for the periods by dividing the (i) sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period, divided by the number of months in the relevant period.
SUBSCRIBERS AND SYSTEM USAGE
On a pro forma basis, after giving effect to the Acquisition, the Company's
subscribers have increased from 17,148 at January 1, 1992 to 287,665 at June
30, 1997. Reductions in the cost of cellular telephone services and equipment
at the retail level have led to an increase in cellular telephone usage by
general consumers for non-business purposes. As a result, the Company believes
that there is an opportunity for significant growth in each of its existing
service areas. The Company will continue to broaden its subscriber base for
basic cellular telephone services as well as to increase its offering of
customized services. The sale of custom calling features typically results in
increased usage of cellular telephones by subscribers, thereby further
enhancing revenues. In 1996, cellular telephone service revenues represented
94.8% of PCW's total revenues, with equipment sales and installation
representing the balance.
MARKETING
The Company's marketing strategy is designed to generate continued net
subscriber growth by focusing on subscribers who are likely to generate lower
than average deactivations and delinquent accounts, while simultaneously
maintaining a low cost of adding net subscribers. Management has implemented
its marketing strategy by training and compensating its sales force in a
manner designed to stress the importance of high penetration levels and
minimum costs per net subscriber addition. PCW's sales staff has a two-tier
structure. A retail sales force handles walk-in traffic, and a targeted sales
staff solicits certain industries and government subscribers. PCW's management
believes that its internal sales force is more likely than independent agents
successfully to select and screen new subscribers and select pricing plans
that realistically match subscriber
52
<PAGE>
means and needs. In addition, PCW motivates its direct sales force to sell
appropriate rate plans to subscribers, thereby reducing churn, by linking
payment of commissions to subscriber retention. PCW believes its use of an
internal sales force keeps marketing costs low, both because commissions are
lower and because subscriber retention is higher than if it used independent
agents. After giving effect to the Acquisition, for the six months ended June
30, 1997, the Company's cost to add a net subscriber was $477. The Company
believes its cost to add a net subscriber will continue to be among the lowest
in the cellular telephone industry, principally because of its in-house direct
sales and marketing staff.
The Company also maintains its low churn rate through an after-sale
telemarketing program implemented through its sales force and a telemarketing
service specializing in cellular customer services. This program not only
enhances customer loyalty, which reduces churn, but also increases add-on
sales and customer referrals. The telemarketing program allows the sales staff
to check customer satisfaction as well as to offer additional calling
features, such as voicemail, call waiting and call forwarding.
The Company's sales force works principally out of retail stores in which
PCW offers its cellular products and services. As of June 30, 1997, PCW
maintained 33 retail stores and 4 offices. Retail stores, which range in size
up to 11,000 square feet are fully equipped to handle customer service and the
sale of cellular services, telephones and accessories. Eight of the newer and
larger stores are promoted by PCW as "Superstores," seven of which are located
in PCW's Georgia/Alabama service areas, and one in the Panama City, Florida
service area. Each Superstore has an authorized warranty repair center and
provides cellular telephone installation and maintenance services. Most of
PCW's larger markets currently have at least one Superstore. In addition, to
enhance convenience for its customers, PCW has begun to open smaller stores in
locations such as shopping malls. In 1997, Palmer plans to open six more
stores in its Georgia/Alabama service areas. The Company's stores provide
subscriber-friendly retail environments--extended hours, a large selection of
phones and accessories, an expert sales staff, and convenient locations--which
make the sales process quick and easy for the subscriber.
The Company markets all of its products and services under the name CELLULAR
ONE. The national advertising campaign conducted by Cellular One Group
enhances PCW's advertising exposure at a fraction of what could be achieved by
PCW alone. The Company also obtains substantial marketing benefits from the
name recognition associated with this widely used service mark, both with
existing subscribers traveling outside PCW's service areas and with potential
new subscribers moving into PCW's service areas. In addition, travelers who
subscribe to CELLULAR ONE service in other markets may be more likely to use
PCW's service when they travel in PCW's service areas. Cellular telephones of
non-wireline subscribers are either programmed to select the non-wireline
carrier (such as PCW) when roaming, unless the non-wireline carrier in the
roaming area is not yet operational, or the subscriber dials a special code or
has a cellular telephone equipped with an "A/B" (wireline/non-wireline) switch
and selects the wireline carrier. The Company is currently negotiating the
renewal of a majority of its contracts with CELLULAR ONE. See "Risk Factors--
Reliance on Use of Third-Party Service Mark."
Through its membership in NACN and other special networking arrangements,
PCW provides extended regional and national service to its subscribers,
thereby allowing them to make and receive calls while in other cellular
service areas without dialing special access codes. This service distinguishes
PCW's call delivery features from those of many of its competitors.
PRODUCTS AND SERVICES
In addition to providing high-quality cellular telephone service in each of
its markets, PCW also offers various custom-calling features such as
voicemail, call forwarding, call waiting, three-way conference calling and no
answer and busy transfer. Several rate plans are presented to prospective
subscribers so that they may choose the plan that will best fit their expected
calling needs. Generally, these rate plans include a high user plan, a medium
user plan, a basic plan and an economy plan. Most rate plans combine a fixed
monthly access fee, per minute usage charges and additional charges for
custom-calling features in a package that offers value to
53
<PAGE>
the subscriber while enhancing airtime use and revenues for PCW. In general,
rate plans which include a higher monthly access fee typically include a lower
usage rate per minute. An ongoing review of equipment and service pricing is
maintained to ensure PCW's competitiveness. As appropriate, revisions to
pricing of service plans and equipment are made to meet the demands of the
local marketplace.
The following table sets forth a breakdown of PCW's revenues from the sale
of its services and equipment for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- ---------------
1992 1993 1994 1995 1996 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Service revenue:
Access and usage (1)... $11,821 $20,324 $37,063 $61,607 $105,415 $50,424 $59,485
Roaming (2)............ 2,231 3,075 5,844 11,157 13,741 6,458 9,758
Long distance (3)...... 992 1,309 2,218 3,634 6,781 3,142 4,113
Other (4).............. 680 1,230 2,745 2,585 2,600 1,395 1,394
------- ------- ------- ------- -------- ------- -------
Total service
revenue............. $15,724 $25,938 $47,870 $78,983 $128,537 $61,419 $74,750
Equipment sales and
installation (5)....... 3,558 5,238 6,381 6,830 7,062 3,455 4,200
------- ------- ------- ------- -------- ------- -------
Total................ $19,282 $31,176 $54,251 $85,813 $135,599 $64,874 $78,950
======= ======= ======= ======= ======== ======= =======
</TABLE>
- ---------------------
(1) Access and usage revenues include monthly access fees for providing
service and usage fees based on per minute usage rates.
(2) Roaming revenues are fees charged for providing services to subscribers of
other systems when such subscribers or "roamers" place or receive a
telephone call within one of PCW's service areas.
(3) Long distance revenue is derived from long distance telephone calls placed
by PCW's subscribers.
(4) Other revenue includes, among other things, connect fees charged to
subscribers for initial activation on the cellular telephone system and fees
for feature services such as voicemail, call forwarding and call waiting.
(5) Equipment sales and installation revenue includes revenue derived from the
sale of cellular telephones and fees for the installation of such
telephones.
Reciprocal agreements between each of PCW's cellular telephone systems and
the cellular telephone systems of other operators allow their respective
subscribers to place calls in most cellular service areas throughout the
country. Roamers are charged usage fees which are generally higher than a
given cellular telephone system's regular usage fees, thereby resulting in a
higher profit margin on roaming revenue. Roaming revenue is a substantial
source of incremental revenue for PCW. For 1996, roaming revenues accounted
for 10.7% of the Company's service revenues and 10.1% of the Company's total
revenue. This level of roaming revenue is due in part to the fact that the
Company's market in Panama City, Florida is a regional shopping and vacation
destination and a number of the Company's cellular telephone systems in the
Georgia and Alabama market are located along major interstate travel
corridors.
In order to develop the market for cellular telephone service, PCW provides
retail distribution of cellular telephones and maintains inventories of
cellular telephones. PCW negotiates volume discounts for the purchase of
cellular telephones and, in many cases, passes such discounts on to its
customers. The Company believes that earning an operating profit on the sale
of cellular telephones is of secondary importance to offering cellular
telephones at competitive prices to potential subscribers. To respond to
competition and to enhance subscriber growth, Palmer has historically sold
cellular telephones below cost.
The Company is currently developing several new services which it believes
will provide additional revenue sources. Packet-switching technology will
allow data to be transmitted much more quickly and efficiently than the
current circuit-switching technology. Packet-switching uses the intervals
between voice traffic on cellular channels to send packets of data instead of
tying up dedicated cellular channels. The packets of information, which may be
transmitted using several different channels, are subsequently reassembled and
directed to the correct party at the receiving end. It is expected that the
development of this technology will make it possible for
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<PAGE>
cellular carriers to offer a broad range of cost-effective wireless data
services, including facsimile and electronic mail transmissions, point-of-sale
credit authorizations, package tracking, remote meter reading, alarm
monitoring and communications between laptop computer units and local area
computer networks or other computer databases. During 1996 Palmer began to
implement the use of microcells. Microcells are low powered transmitters,
typically constructed on a pole or the roof of a building, which provide
reduced radius service within a specific area, such as large office buildings,
underground facilities or areas shielded by topographical obstructions.
Microcell service could be used, for instance, to provide wireless service
within an office environment that was also integrated with wireless service to
the home.
CUSTOMER SERVICE
The Company is committed to attracting new subscribers and retaining
existing subscribers by providing consistently high-quality customer service.
In each of its cellular service areas, PCW maintains a local staff, including
a store manager, customer service representatives, technical and engineering
staff, sales representatives and installation and repair facilities. Each
cellular service area handles its own customer-related functions such as
customer activations, account adjustments and rate plan changes. Local offices
and installation and repair facilities enable PCW to better service customers,
schedule installations and repairs and monitor the technical quality of the
cellular service areas.
In addition, subscribers are able to report cellular telephone service or
account problems to PCW 24 hours a day. Through the use of sophisticated
monitoring equipment, technicians at the Company's headquarters are able to
monitor the technical performance of its service areas.
To ensure high-quality customer service, the Cellular One Group authorizes a
third-party marketing research firm to perform customer satisfaction surveys
of each of its licensees. Licensees must achieve a minimum customer
satisfaction level in order to be permitted to continue using the CELLULAR ONE
service mark. In 1996, PCW was awarded the #1 MSA and #2 RSA rankings in
CELLULAR ONE's National Customer Satisfaction Survey. PCW has held number one
rankings in four out of the last five years. PCW believes it has achieved this
first place ranking through effective implementation of its direct sales and
customer service support strategy.
The Company has implemented a new software package to combat cellular
telephone service fraud. This new software system can detect counterfeit
cellular telephones while they are being operated and enables PCW to terminate
service to the fraudulent user of the counterfeit cellular telephone. The
Company also helps protect itself from fraud with pre-call customer validation
and subscriber profiles specifically designed to combat the fraudulent use of
subscriber accounts.
NETWORKS
The Company strives to provide its subscribers with virtually seamless
coverage throughout its cellular service market areas, thereby permitting
subscribers to travel freely within this region and have their calls and
custom calling features, such as voicemail, call waiting and call forwarding,
follow them automatically without having to notify callers of their location
or to rely on special access codes. The Company has been able to offer
virtually seamless coverage by implementing a switch interconnection plan to
mobile telephone switching offices ("MTSO") located in adjoining markets.
PCW's equipment is built by NORTEL, formerly Northern Telecom, Inc. ("NTI"),
and interconnection between MTSOs has been achieved using NTI's internal
software and hardware.
Through its participation in NACN since 1992 and other special networking
arrangements, PCW has pursued its goal of offering seamless regional and
national cellular service to its subscribers. NACN is the largest wireless
telephone network system in the world--linking non-wireline cellular operators
throughout the United States and Canada. Membership in NACN has aided PCW in
integrating its cellular telephone systems within its region and has permitted
PCW to offer cellular telephone service to its subscribers throughout a large
portion of
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<PAGE>
the United States, Canada, Mexico and Puerto Rico. NACN has provided PCW with
a number of distinct advantages: (i) lower costs for roaming verification,
(ii) increased roaming revenue, (iii) more efficient roaming service and (iv)
integration of Palmer's markets with over 4,600 cities in more than 40 states
in the United States, Canada, Mexico and Puerto Rico.
SYSTEM DEVELOPMENT AND EXPANSION
The Company develops its service areas by adding channels to existing cell
sites and by building new cell sites. Such development is done for the purpose
of increasing capacity and improving coverage in direct response to projected
subscriber demand. Projected subscriber demand is calculated for each cellular
service area on a cell by cell basis. These projections involve a traffic
analysis of usage by existing subscribers and an estimation of the number of
additional subscribers in each such area. In calculating projected subscriber
demand, PCW builds into its design assumptions a maximum call "blockage" rate
of 2.0% (percentage of calls that are not connected on first attempt at peak
usage time during the day).
The following table sets forth, by market, at the dates indicated, the
number of PCW's operational cell sites.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
------------------------------------ -----------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Georgia/Alabama............. 28(1) 39(1) 70(2) 121(3) 181(4) 199(5)
Panama City, FL............. 4 7 7 9 11 11
--- --- --- --- --- ---
Total..................... 32(1) 46(1) 77(2) 130(3) 192(4) 210(5)
=== === === === === ===
</TABLE>
- ---------------------
(1) Includes two cell sites in the Alabama-7 RSA where Palmer had IOA from
June 1991 through June 1994.
(2) Includes one cell site in the Alabama-5 RSA where Palmer has IOA for two
counties of such RSA and 17 existing cell sites that were purchased in the
Georgia Acquisition.
(3) Includes two existing cell sites in the Alabama-5 RSA where Palmer has IOA
for two counties of such RSA and 28 existing cell sites that were purchased
in the GTE Acquisition.
(4) Includes three existing cell sites in the Alabama-5 RSA where Palmer has
IOA for two counties of such RSA and 17 existing cell sites that were
purchased in the Horizon and USCOC acquisitions. See "--Acquisitions."
(5) Includes two existing cell sites in the Alabama-5 RSA where Palmer has
IOA.
The Company estimates that in 1996 the capacity of its existing cellular
telephone systems increased 42.0%. During 1996, PCW spent $38.5 million and,
based on projected growth in subscriber demand, expects to spend approximately
$35 million in 1997 in order to build out its cellular service areas, install
an additional microwave network and implement certain digital radio
technology. The Company has constructed 20 cell sites to date in 1997 and
plans to construct 10 additional cell sites with respect to its existing
cellular systems during 1997 to meet projected subscriber demand and improve
the quality of service. Cell site expansion is expected to enable the Company
to continue to add subscribers, enhance use of its cellular telephone systems
by existing subscribers, increase services used by subscribers of other
cellular telephone systems due to the larger geographic area covered by the
cellular telephone network and further enhance the overall efficiency of the
network. The Company believes that the increased cellular telephone coverage
will have a positive effect on market penetration and subscriber usage.
Microwave networks enable PCW to connect switching equipment and cell sites
without making use of local landline telephone carriers, thereby reducing or
eliminating fees paid to landline carriers. During 1996, PCW spent $1.0
million to build additional microwave connections. In addition, in 1996 PCW
spent $2.6 million to build a fiber optic network between Dothan, Alabama and
Panama City, Florida. The installation of this network resulted in savings to
PCW from a reduction in fees paid to telephone companies for landline charges,
as well as giving PCW the ability to lease out a significant portion of
capacity.
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DIGITAL CELLULAR TECHNOLOGY
Over the next decade, it is expected that cellular telephones will gradually
convert from analog to digital technology. This conversion is due in part to
capacity constraints in many of the largest cellular markets, such as Los
Angeles, New York and Chicago. As carriers reach limited capacity levels,
certain calls may be unable to be completed, especially during peak hours.
Digital technology increases system capacity and offers other advantages over
analog technology, including improved overall average signal quality, improved
call security, potentially lower incremental costs for additional subscribers
and the ability to provide data transmission services. The conversion from
analog to digital technology is expected to be an industry-wide process that
will take a number of years. The exact timing and overall costs of such
conversion are not yet known.
The Company began offering TDMA standard digital service during 1997. This
digital network allows PCW to offer advanced cellular features and services
such as caller-ID, short message paging and extended battery life. PCW
presently plans to roll out TDMA digital cellular services in the rest of its
major markets during 1997. Where cell sites are not yet at their maximum
capacity of radio channels, PCW is adding digital channels to the network
incrementally based on the relative demand for digital and analog channels.
Where cell sites are at full capacity, analog channels are being removed and
redeployed to expand capacity elsewhere within the network and replaced in
such cell sites by digital channels. The implementation of digital cellular
technology over a period of several years will involve modest incremental
expenditures for switch software and possible significant cost reductions as a
result of reduced purchases of radio channels and a reduced requirement to
split existing cells. However, as indicated above, the extent of any
implementation of digital radio channels and the amount of any cost savings
ultimately to be derived therefrom will depend primarily on subscriber demand.
In the ordinary course of business, equipment upgrades at the cell sites have
involved purchasing dual mode radios capable of using both analog and digital
technology.
The benefits of digital radio channels can only be achieved if subscribers
purchase cellular telephones that are capable of transmitting and receiving
digital signals. Currently, such telephones are more costly than analog
telephones. The widespread use of digital cellular telephones is likely to
occur only over a substantial period of time and there can be no assurance
that this technology will replace analog cellular telephones. In addition,
since most of PCW's existing subscribers currently have cellular telephones
that exclusively utilize analog technology, it will be necessary to continue
to support, and if necessary increase, the number of analog radio channels
within the network for many years.
ACQUISITIONS
The Company will continue to evaluate expansion through acquisitions of both
(i) contiguous cellular properties and other strategically located RSAs and
small to mid-sized MSAs and (ii) minority interests in its existing cellular
properties. In evaluating acquisition targets, the Company considers, among
other things, demographic factors, including population size and density,
geographic proximity to existing service areas, traffic patterns, cell site
coverage and required capital expenditures.
PCI entered the cellular telephone business in 1987, when it constructed a
cellular telephone system for the Fort Myers, Florida MSA. PCI acquired
control of this system in March 1988 and rapidly expanded its cellular
telephone holdings, acquiring control of the non-wireline cellular licenses
for the Columbus and Albany, Georgia and Dothan and Montgomery, Alabama MSAs
in 1988.
In 1991, Palmer acquired control of the non-wireline cellular license for
the Panama City, Florida MSA. In 1992 and 1993, Palmer acquired two non-
wireline cellular licenses for RSAs contiguous to Palmer's MSAs in Georgia and
Alabama: the Georgia-9 RSA in June 1992 and the Alabama-8 RSA in April 1993.
The Georgia-9 RSA acquisition added the geographic territory between the
Columbus, Macon and Albany, Georgia MSAs to Palmer's service area coverage.
The Alabama-8 RSA expanded Palmer's service areas around three MSAs served by
Palmer, covering a substantial portion of the geographic territory between the
Montgomery, Alabama,
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Columbus, Georgia and Dothan, Alabama MSAs and the Georgia-9 RSA. In 1993,
Palmer also increased its majority position in its MSAs in Albany, Georgia and
in Dothan and Montgomery, Alabama, through the purchase of certain minority
interests for an aggregate purchase price of $2.9 million.
During 1994, Palmer continued to acquire minority interests in six of its
MSAs for an aggregate purchase price of $3.1 million. Also, on October 31,
1994, Palmer acquired the cellular telephone systems of Southeast Georgia
Cellular Limited Partnership ("SGC") and Georgia 12 Cellular Limited
Partnership ("Georgia 12" and together with SGC, the "Georgia Partnerships")
for an aggregate purchase price of $91.7 million (the "Georgia Acquisition").
The assets acquired by Palmer from SGC included the non-wireline cellular
telephone systems for the Georgia-7 RSA, Georgia-8 RSA and Georgia-10 RSA. The
assets acquired by Palmer from Georgia 12 included the non-wireline cellular
telephone system located in the Georgia-12 RSA. The cellular telephone systems
in the acquired RSAs serve a geographic territory in southeast Georgia that is
adjacent to Palmer's Georgia-9 RSA and Macon, Georgia MSA.
In December 1995, Palmer acquired interests in cellular telephone systems by
purchasing Georgia Metronet, Inc. ("GMI") and Augusta Metronet, Inc. ("AMI"
and together with GMI, the "GTE Companies") for an aggregate purchase price of
$158.4 million (the "GTE Acquisition"). The assets acquired by Palmer in the
GTE Acquisition included the non-wireline cellular telephone system located in
the Savannah MSA and Augusta MSA, respectively. The cellular telephone systems
in the newly-acquired MSAs serve a geographic territory in eastern Georgia and
a portion of South Carolina that is adjacent to Palmer's existing markets in
the Georgia-8 RSA and Georgia-12 RSA. In addition, Palmer also acquired the
IOA to provide cellular service to the southern portions of the South
Carolina-7 RSA and South Carolina-8 RSA, respectively, which serve a
geographic territory that is adjacent to Palmer's existing markets in the
Georgia-8 RSA as well as the Savannah, and Augusta, Georgia MSAs. In addition,
during 1995, Palmer acquired additional minority interests in six of its MSAs
for an aggregate purchase price of $2.0 million.
On June 20, 1996, Palmer acquired the cellular telephone system of USCOC of
Georgia RSA #1, Inc. ("USCOC") for an aggregate purchase price of $31.6
million. The assets acquired by Palmer from USCOC included the cellular
telephone system in the Georgia-1 RSA. The cellular telephone system in the
acquired RSA serves a geographic territory of northwest Georgia between
Chattanooga and Atlanta.
On July 5, 1996, two of Palmer's majority-owned subsidiaries acquired the
cellular telephone system of Horizon Cellular Telephone Company of Spalding,
L.P. ("Horizon") for an aggregate purchase price of $36.0 million. The assets
acquired by Palmer from Horizon include the cellular telephone system in the
Georgia-6 RSA. The cellular telephone system in the acquired RSA serves a
geographic territory of west central Georgia adjacent to Palmer's Macon and
Columbus, Georgia MSAs.
On February 1, 1997, a majority-owned subsidiary of Palmer acquired the
cellular telephone system serving the Georgia-13 RSA from Mobile
Communications Systems L.P. for a total purchase price of $31.3 million. The
cellular telephone system in the acquired RSA serves a geographic territory of
southwest Georgia adjacent to Palmer's Albany, Georgia and Dothan, Alabama
MSAs.
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COMPETITION
The cellular telephone service industry in the United States is highly
competitive. Cellular telephone systems compete principally on the basis of
services and enhancements offered, the technical quality of the cellular
system, customer service, coverage capacity and price of service and
equipment. Currently, the Company's primary competition in each of its service
areas is the other cellular licensee--the wireline carrier. The table below
lists the wireline competitor in each of the Company's existing service areas:
<TABLE>
<CAPTION>
MARKET WIRELINE COMPETITOR
<S> <C>
Albany, GA................ ALLTEL
Augusta, GA............... ALLTEL
Columbus, GA.............. Public Service Cellular
Macon, GA................. BellSouth
Savannah, GA.............. ALLTEL
Georgia-1 RSA............. BellSouth
Georgia-6 RSA............. BellSouth and Intercel(1)
Georgia-7 RSA............. Cellular Plus and BellSouth(1)
Georgia-8 RSA............. ALLTEL
Georgia-9 RSA............. ALLTEL and Public Service Cellular(1)
Georgia-10 RSA............ Cellular Plus and ALLTEL(1)
Georgia-12 RSA............ ALLTEL
Georgia-13 RSA............ ALLTEL
Dothan, AL................ BellSouth
Montgomery, AL............ ALLTEL
Alabama-8 RSA............. ALLTEL
Panama City, FL........... 360(degrees) Communications Company (formerly
Sprint Cellular)
</TABLE>
- ---------------------
(1) The wireline service area has been subdivided into two service areas by
the purchasers of the authorization for the RSA.
The Company also faces limited competition from and may in the future face
increased competition from broadband PCS. Broadband PCS involves a network of
small, low-powered transceivers placed throughout a neighborhood, business
complex, community or metropolitan area to provide customers with mobile and
portable voice and data communications. PCS subscribers communicate using
digital radio handsets.
The FCC allocated 120 MHZ of spectrum for licensed broadband PCS. The
allocations for licensed PCS services are split into six blocks of
frequencies--blocks "A" and "B" being two 30 MHZ allocations for each of the
51 Major Trading Areas ("MTAs") throughout the United States; block "C" being
one 30 MHZ allocation in each of 493 Basic Trading Areas ("BTAs") in the
United States; and blocks "D," "E" and "F" being three 10 MHZ allocations in
each of the BTAs. The FCC has concluded the auction of all broadband PCS
frequency blocks.
The Company also faces competition from other existing communications
technologies such as conventional mobile telephone service, SMR and ESMR
systems and paging services.
In addition, the FCC has licensed operators to provide mobile satellite
service in which transmissions from mobile units to satellites would augment
or replace transmissions to land-based stations. Although such a system is
designed primarily to serve remote areas and is subject to transmission delays
inherent in satellite communications, a mobile satellite system could augment
or replace communications with segments of land-based cellular systems. Based
on current technologies, however, satellite transmission services are not
expected to be competitively priced with cellular telephone services.
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<PAGE>
SERVICE MARKS
CELLULAR ONE is a registered service mark with the U.S. Patent and Trademark
Office. The service mark is owned by Cellular One Group, a Delaware general
partnership of Cellular One Marketing, Inc., a subsidiary of Southwestern Bell
Mobile Systems, Inc., together with Cellular One Development, Inc., a
subsidiary of AT&T and Vanguard Cellular Systems, Inc. The Company uses the
CELLULAR ONE service mark to identify and promote its cellular telephone
service pursuant to licensing agreements with Cellular One Group (the
"Licensor"). In 1996, PCW paid $219,000 in licensing and advertising fees
under these agreements. Licensing and advertising fees are determined based
upon the population of the licensed areas. The licensing agreements require
PCW to provide cellular telephone service to its customers, and to maintain a
certain minimum overall customer satisfaction rating in surveys commissioned
by the Licensor. PCW's customer satisfaction ratings have consistently far
exceeded this required minimum. While the licensing agreements which PCW has
entered into have historically been for five-year terms, the majority of these
contracts have expired. The Company is currently negotiating to renew these
contracts and in the interim has month to month agreements to use the service
mark. See "Risk Factors--Reliance on Use of Third-Party Service Mark."
REGULATION
As a provider of cellular telephone services, PCW is subject to extensive
regulation by the federal government.
The licensing, construction, operation, acquisition and transfer of cellular
telephone systems in the United States are regulated by the FCC pursuant to
the Communications Act of 1934, as amended (the "Communications Act"). The FCC
has promulgated rules governing the construction and operation of cellular
telephone systems and licensing and technical standards for the provision of
cellular telephone service ("FCC Rules"). For cellular licensing purposes, the
United States is divided into MSAs and RSAs. In each market, the frequencies
allocated for cellular telephone use are divided into two equal blocks
designated as Block A and Block B. Block A licenses were initially reserved
for non-wireline companies, such as Palmer, while Block B licenses were
initially reserved for entities affiliated with a local wireline telephone
company. Under current FCC Rules, a Block A or Block B license may be
transferred with FCC approval without restriction as to wireline affiliation,
but generally, no entity may own any substantial interest in both systems in
any one MSA or RSA. The FCC may prohibit or impose conditions on sales or
transfers of licenses.
Initial operating licenses are generally granted for terms of up to 10
years, renewable upon application to the FCC. Licenses may be revoked and
license renewal applications denied for cause after appropriate notice and
hearing. Palmer's cellular licenses expire in the following years with respect
to the following number of service areas: 1997 (four); 1998 (three); 2000
(two); 2001 (four); 2002 (three) and 2006 (one). The FCC has issued a decision
confirming that current licensees will be granted a renewal expectancy if they
have complied with their obligations under the Communications Act during their
license terms and provided substantial public service. A potential challenger
will bear a heavy burden to demonstrate that a license should not be renewed
if the licensee's performance merits a renewal expectancy. The Company
believes that the licenses controlled by the Company will be renewed in a
timely manner upon application.
Under FCC rules, each cellular licensee was given the exclusive right to
construct one of two cellular telephone systems within the licensee's MSA or
RSA during the initial five-year period of its authorization. At the end of
such five-year period, other persons are permitted to apply to serve areas
within the licensed market that are not served by the licensee. Current FCC
Rules provide that competing "unserved area" applications are to be resolved
through the auction process. Palmer and PCW have no material unserved areas in
any of their cellular telephone systems that have been licensed for more than
five years.
The Company also regularly applies for FCC authority to use additional
frequencies, to modify the technical parameters of existing licenses, to
expand its service territory and to provide new services. The Communications
Act requires prior FCC approval for acquisitions by PCW of other cellular
telephone systems licensed by the FCC and transfers by Palmer of a controlling
interest in any of its licenses or construction permits, or any rights
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thereunder. Although there can be no assurance that any future requests for
approval or applications filed by the Company will be approved or acted upon
in a timely manner by the FCC, based upon its experience to date, the Company
has no reason to believe such requests or applications would not be approved
or granted in due course.
The Communications Act prohibits the holding of a common carrier license
(such as PCW's cellular licenses) by a corporation of which more than 20% of
the capital stock is owned directly or beneficially by aliens. Where a
corporation such as PCW controls another entity that holds an FCC license,
such corporation may not have more than 25% of its capital stock owned
directly or beneficially by aliens, in each case, if the FCC finds that the
public interest would be served by such prohibitions. Failure to comply with
these requirements may result in the FCC issuing an order to Palmer requiring
divestiture of alien ownership to bring PCW into compliance with the
Communications Act. In addition, fines or a denial of renewal, or revocation
of the license are possible.
From time to time, legislation which could potentially affect the Company,
either beneficially or adversely, may be proposed by federal and state
legislators. On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecom Act") was signed into law, revising the Communications Act to
eliminate unnecessary regulation and to increase competition among providers
of communications services. The Company cannot predict the future impact of
this or other legislation on its operations.
The major provisions of the Telecom Act potentially affecting Palmer are as
follows:
Interconnection. The Telecom Act requires state public utilities commissions
and/or the FCC to implement policies that mandate cost-based reciprocal
compensation between cellular carriers and local exchange carriers ("LEC") for
interconnection services.
On August 8, 1996, the FCC released its First Report and Order in the matter
of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996 ("FCC Order") establishing the rules for the
costing and provisioning of interconnection services and the offering of
unbundled network elements by incumbent local exchange carriers. The FCC Order
established procedures for Palmer's renegotiation of interconnection
agreements with the incumbent local exchange carrier in each of Palmer's
markets. LECs and state regulators filed appeals of the FCC Order, which have
been consolidated in the US Court of Appeals for the Eighth Circuit. The Court
has temporarily stayed the effective date of the pricing rules until more
permanent relief can be fashioned.
The Company is currently negotiating with the incumbent local exchange
carriers and has already renegotiated certain interconnection agreements with
LECs in most of the Company's markets and believes that these negotiations
will result in a substantial decrease in interconnection expenses incurred by
PCW.
Facilities siting for personal wireless services. The siting and
construction of cellular transmitter towers, antennas and equipment shelters
are often subject to state or local zoning, land use and other regulation.
Such regulation may require zoning, environmental and building permit
approvals or other state or local certification. The Telecom Act provides that
state and local authority over the placement, construction and modification of
personal wireless services (including cellular and other commercial mobile
radio services and unlicensed wireless services) shall not prohibit or have
the effect of prohibiting personal wireless services or unreasonably
discriminate among providers of functionally equivalent services. In addition,
local authorities must act on requests made for siting in a reasonable period
of time and any decision to deny must be in writing and supported by
substantial evidence. Appeals of zoning decisions that fail to comply with the
provisions of the Telecom Act can be made on an expedited basis to a court of
competent jurisdiction, which can be either federal district or state court.
PCW anticipates that, as a result the Telecom Act, it will more readily
receive local zoning approval for proposed cellular base stations. In
addition, the Telecom Act codified the Presidential memorandum on the use of
federal lands for siting wireless facilities by requiring the President or his
designee to establish procedures whereby federal agencies will make available
their properties, rights of ways and other easements at a fair and reasonable
price for service dependent upon federal spectrum.
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Environmental effect of radio frequency emissions. The Telecom Act provides
that state and local authorities cannot regulate personal wireless facilities
based on the environmental effects of radio frequency emissions if those
facilities comply with the federal standard.
Universal service. The Telecom Act also provides that all communications
carriers providing interstate communications services, including cellular
carriers, must contribute to the federal universal service support mechanisms
that the FCC will establish. The FCC implemented this provision of the Telecom
Act in a "Report and Order" released May 8, 1997 in the matter of "Federal-
State Joint Board on Universal Service," which also provides that any cellular
carrier is potentially eligible to receive universal service support.
The Communications Act preempts state and local regulation of the entry of,
or the rates charged by, any provider of cellular service.
EMPLOYEES
At June 30, 1997 Palmer had 577 full-time employees (excluding Fort Myers),
none of whom is represented by a labor organization. Management considers its
relations with employees to be good.
PROPERTIES
For each market served by the Company's operations, the Company maintains at
least one sales or administrative office and operates a number of cell
transmitter and antenna sites. As of June 30, 1997, the Company had
approximately 32 leases for retail stores used in conjunction with its
operations and 3 leases for administrative offices. PCW also had approximately
130 leases to accommodate cell transmitters and antennas as of July 8, 1997.
LEGAL PROCEEDINGS
Neither the Company nor Palmer is currently involved in any pending legal
proceedings likely to have a material adverse impact on the Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to persons
expected to be the directors and executive officers of the Company upon
consummation of the Acquisition.
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
William J. Ryan.... 65 President and Chief Executive Officer
M. Wayne Wisehart.. 50 Vice President, Treasurer, Chief Financial Officer
Leon Hensen........ 49 Senior Vice President--General Manager
K. Patrick Meehan.. 39 Vice President--General Counsel and
Assistant Secretary
Robert Price....... 64 Director
</TABLE>
EXECUTIVE OFFICERS
The following is a biographical summary of the experience of the executive
officers of Palmer that are expected to continue as executive officers of the
Company following the consummation of the Acquisition. The following
constitutes all of the current executive officers of Palmer other than Robert
G. Engelhardt who serves as Executive Vice President and Secretary of Palmer,
who is expected to retire at the time of the consummation of the Acquisition.
The Company has entered into employment contracts with William J. Ryan and M.
Wayne Wisehart to remain as officers following the consummation of the
Acquisition and expects to enter into employment contracts with other key
employees prior to the consummation of the Acquisition. However, there can be
no assurance that the Company will be successful in consummating any such
contracts. The executive officers currently have employment agreements which
provide for payments in certain situations upon a change of control, such as
the Merger.
WILLIAM J. RYAN, President and Chief Executive Officer. Mr. Ryan served as
Chief Executive Officer and President of PCI from 1984 until July 1995. Mr.
Ryan was Chief Operating Officer and President of PCI from 1982 to 1984. Mr.
Ryan continues to serve as a director of PCI. Mr. Ryan has over 40 years of
communications and telecommunications experience. He joined PCI in 1970
following that company's acquisition of certain radio and cable properties
which Mr. Ryan had partially owned and operated since 1955. In his capacity as
Chief Executive Officer, Mr. Ryan has successfully led the Company through 18
acquisitions of cellular telephone systems. Mr. Ryan is a director of the
Cellular Telecommunications Industry Association, the founding chairman of
Cable Television Advertising Bureau, Inc. and a former president of the
Florida Cable Association, the Florida Broadcasters Association and the
Southern Cable Association.
M. WAYNE WISEHART, Vice President, Treasurer and Chief Financial Officer.
Mr. Wisehart served as Chief Financial Officer of PCI from 1982 until July
1995. He was promoted to Treasurer of PCI in 1983 and to Vice President in
1987. Mr. Wisehart continues to serve as a director of PCI. Mr. Wisehart has
over 15 years of communications and telecommunications experience. In his
capacity as Chief Financial Officer of PCI, he was instrumental in the
financial management and direction of the Company. Prior to joining PCI, Mr.
Wisehart served as Treasurer of the Des Moines Register & Tribune Company of
Des Moines, Iowa, for approximately five years. He began his career in 1972
with Peat, Marwick, Mitchell & Co. in St. Louis, Missouri, where he became a
Certified Public Accountant. Mr. Wisehart then served as a tax specialist for
three years with General Dynamics Corporation in St. Louis, Missouri.
LEON J. HENSEN, Senior Vice President-General Manager. Mr. Hensen served as
General Manager of PCI from 1987 until July 1995. Mr. Hensen has over 25 years
of communications and telecommunications experience. In 1984, he joined
American Cellular Telephone Company ("ACTC") in Fort Myers, Florida as Vice
President of Engineering and Operations. After the sale of ACTC to BellSouth
in 1986, Mr. Hensen provided consulting services to BellSouth and McCaw
Cellular Communications. From 1973 to 1984, Mr. Hensen served as Vice
President of Engineering and Operations of Rogers Radio Communications
Services Inc.,
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<PAGE>
in Chicago, Illinois. From 1970 to 1973, he was employed by Motorola, Inc. in
the Area Systems Engineering Group.
K. PATRICK MEEHAN, Vice President-General Counsel and Assistant Secretary.
Mr. Meehan served as General Counsel and Assistant Secretary of PCI from 1991
until July 1995. As an attorney with the law firm of Leibowitz & Spencer in
Miami, Florida, from 1985 to May 1991, Mr. Meehan represented clients before
the FCC and handled corporate transactions involving broadcast, paging and
cellular telephone companies. He is a 1985 graduate of the Columbus School of
Law and The Institute for Communications Law Studies at The Catholic
University of America in Washington, D.C. Mr. Meehan is a member of the
Florida Bar, the District of Columbia Bar and the American Bar Association.
DIRECTOR
ROBERT PRICE has been a Director of the Company and Holdings since 1997. Mr.
Price has served concurrently as a Director and the Chief Executive Officer,
President and Treasurer of PCC since 1979. Mr. Price has been a Director of
PriCellular since 1990. Mr. Price was the President and Assistant Treasurer of
PriCellular from 1990 until May 1997 and has served as Chairman of PriCellular
since May 1997. In 1992 PCC filed for protection from creditors pursuant to
Chapter 11 of the United States Bankruptcy Code. The Company's Amended Plan of
Reorganization was confirmed on June 11, 1992 and became effective on December
30, 1992. Mr. Price, an attorney, is a former General Partner of Lazard Freres
& Co. He has served as an Assistant United States Attorney, practiced law in
New York and served as Deputy Mayor of New York City. In the early sixties,
Mr. Price served as President and Director of Atlantic States Industries, a
corporation owning weekly newspapers and four radio stations. After leaving
public office, Mr. Price became Executive Vice President of The Dreyfus
Corporation and an Investment Officer of The Dreyfus Fund. In 1972 he joined
Lazard Freres & Co. Mr. Price has served as a Director of Holly Sugar
Corporation, Atlantic States Industries, The Dreyfus Corporation, Graphic
Scanning Corp. and Lane Bryant, Inc., and is currently a member of The Council
on Foreign Relations. Mr. Price serves as the Representative of the Majority
Leader and President Pro Tem of the New York Senate on the Board of Directors
of the Municipal Assistance Corporation for the City of New York and as a
Member of the Board of Trustees of the City University of New York. Mr. Price
is also a Director and president of TLM Corporation.
DIRECTOR COMPENSATION
Directors are not paid fees.
64
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid to the executive officers of Palmer for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ------------------
NAME AND PRINCIPAL SECURITIES ALL OTHER
POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS COMPENSATION
------------------ ---- --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
William J. Ryan, Presi-
dent and 1996 $339,731 $ 34,000 $31,422(1)
Chief Executive Officer 1995 $331,651 $119,880 130,000 $55,356
Robert G. Engelhardt,
Executive 1996 $251,538 $ 25,200 $18,726(2)
Vice President and Sec-
retary 1995 $239,019 $ 57,600 120,000 $26,073
M. Wayne Wisehart, Vice
President, 1996 $152,211 $ 15,250 $23,559(3)
Treasurer and Chief Fi-
nancial Officer 1995 $145,256 $ 34,800 75,000 $33,417
Leon J. Hensen, Senior
Vice 1996 $173,173 $ 13,880 $16,798(4)
President-General Man-
ager 1995 $163,862 $ 39,188 75,000 $22,764
K. Patrick Meehan, Vice
President- 1996 $124,423 $ 12,500 $19,386(5)
General Counsel and As-
sistant Secretary 1995 $109,936 $ 26,400 65,000 $15,108
</TABLE>
- --------
(1) Includes the following: PCI 401(k) Profit Sharing Plan and Trust ("401(k)
Plan") contributions of $9,500, auto allowance of $7,415 (including
insurance and license), tax services of $5,228, club dues of $5,535 and
medical reimbursements of $3,744.
(2) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,744 (including insurance and license), tax services of
$850, club dues of $1,051 and medical reimbursements of $581.
(3) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,798 (including insurance and license), tax services of $0,
club dues of $7,261 and medical reimbursements of $0.
(4) Includes the following: 401(k) Plan contributions of $9,078, auto
allowance of $6,501 (including insurance and license), tax services of $0,
club dues of $1,219 and medical reimbursements of $0.
(5) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,975 (including insurance and license), tax services of
$275, club dues of $1,218 and medical reimbursements of $1,418.
STOCK OPTIONS
During 1996, no stock options were granted to or exercised by the executive
officers of Palmer. The following table provides information regarding the
value of all unexercised options held at December 31, 1996 by the executive
officers of Palmer.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
------------------------- -------------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
William J. Ryan............. 86,666 43,334 $ 0 $ 0
Robert G. Engelhardt........ 80,000 40,000 $ 0 $ 0
M. Wayne Wisehart........... 50,000 25,000 $ 0 $ 0
Leon J. Hensen.............. 50,000 25,000 $ 0 $ 0
K. Patrick Meehan........... 43,333 21,667 $ 0 $ 0
</TABLE>
- --------
(1) Based on a per share price of $10.375 on February 18, 1997.
65
<PAGE>
EMPLOYMENT AGREEMENTS
In 1995, the Company entered into employment agreements with each of Messrs.
Ryan and Engelhardt, for an initial term of three years, and Wisehart, Hensen
and Meehan, for an initial term of two years. Each agreement has an automatic
one-year renewal on each anniversary date thereof. Base salaries under the
agreements for 1996 were $340,000, $252,000, $152,500, $173,500 and $125,000,
respectively. Each agreement specifies that if the executive officer is
terminated by the Company without cause (as defined therein), or if the
executive officer terminates the agreement for good reason (as defined
therein, including if the employment of the executive officer is terminated
within one year of a change in control of the Company), the Company will pay
to the executive officer the full base salary and benefits which would
otherwise have been paid to such officer during a fixed term (three years for
Messrs. Ryan and Engelhardt; two years for Messrs. Wisehart, Hensen and
Meehan) (to be paid at the time such payments are due). The Compensation
Committee of the Board of Directors approved 1997 base salaries under these
employment agreements as follows: $340,000 for Mr. Ryan; $178,500 for Mr.
Hensen; $160,000 for Mr. Wisehart; and $140,000 for Mr. Meehan.
Pursuant to the change of control provision described above, approximately
$4.0 million of payments could become payable under such contracts at the time
of the Merger. Approximately $1.4 million will be immediately payable to Mr.
Ryan as a severance payment pursuant to his existing employment contract upon
consummation of the Acquisition and approximately $2.6 million of severance
payments could become payable over several years pursuant to existing
employment contracts between Palmer and its other executive officers. The
Company has entered into employment contracts with Mr. Ryan and Mr. Wisehart
to continue as officers after the consummation of the Acquisition and it
expects to enter into employment contracts with other key employees prior to
the consummation of the Acquisition. Except for $1.4 million payable to Mr.
Ryan, there can be no assurances as to the amount of payments that may be made
to such officers, in recognition of such severance rights, whether or not they
continue with the Company after the consummation of the Acquisition.
Each agreement also provides that for one year following termination of
employment, the executive officer will not, in any state in which the Company
is engaged or plans to engage in business, (i) compete with the Company on
behalf of the executive officer or any third party, (ii) participate as a
director, agent, representative, stockholder or partner or have any direct or
indirect financial interest in any enterprise which engages in the business in
which the Company is engaged, or (iii) participate as an employee or officer
in any enterprise in which such officer's responsibilities relate to the
cellular business or any other business in which the Company is engaged;
provided, however, that ownership by such officer of less than 5% of the
outstanding stock of any corporation listed on a national securities exchange
conducting any such business will not be deemed a violation of such non-
competition provision.
66
<PAGE>
PRINCIPAL STOCKHOLDERS
All of the Company's issued and outstanding capital stock is owned by
Holdings which is an indirect wholly owned subsidiary of PCC. The following
table sets forth certain information with respect to the beneficial ownership
of the common stock of PCC as of August 8, 1997 by (i) each person or group
known to the Company who beneficially owns more than five percent of PCC
common stock and (ii) all directors and executive officers of the Company as a
group:
<TABLE>
<CAPTION>
CLASS OF NUMBER OF PERCENTAGE
STOCK SHARES (1) OF CLASS
NAME OF BENEFICIAL OWNER -------- ---------- ----------
<S> <C> <C> <C>
Robert Price.............. Common Stock 866,758 17.3%
Series A Preferred Stock(2) 728,133 100%
Series B Preferred Stock(3) 364,066 100%
William J. Ryan........... -- -- --
M. Wayne Wisehart......... -- -- --
Leon J. Hensen............ -- -- --
K. Patrick Meehan......... -- -- --
NatWest Capital Markets
Limited.................. PIK Preferred Stock(4) 1,129,000 100%
All directors and officers
as a
group (5 persons)........ Common Stock 866,758 17.3%
Series A Preferred Stock 728,133 100%
Series B Preferred Stock 364,066 100%
</TABLE>
- ---------------------
(1) Under the applicable rules of the Securities and Exchange Commission, each
person or entity is deemed to be a beneficial owner with the power to vote
and direct the disposition of these shares.
(2) The Series A Preferred Stock votes with the Common Stock on a share for
share basis.
(3) The Series B Preferred Stock votes with the Common Stock and is entitled
to one-half vote per share.
(4) The PIK Preferred Stock does not have voting rights (other than as
required by law).
DESCRIPTION OF NEW CREDIT FACILITY
The New Credit Facility is expected to be provided by a syndicate of banks,
financial institutions and other "accredited investors" (as defined in
Regulation D under the Securities Act; each such bank, financial institution
and accredited investor being a "Lender" and, collectively, the "Lenders") led
by Donaldson, Lufkin & Jenrette Securities Corporation, as arranger and DLJ
Capital Funding, as syndication agent. The New Credit Facility will include a
$325.0 million term loan facility and a $200.0 million revolving credit
facility, which will provide for loans and under which letters of credit may
be issued and a portion of which will be made available as a swingline
facility. The term loan facility is comprised of tranche A term loans of up to
$100.0 million, which will have a maturity of eight years, and tranche B term
loans of up to $225.0 million, which will have a maturity of nine years. The
revolving credit facility will terminate eight years after the closing date of
the New Credit Facility (the "Closing Date").
The New Credit Facility will bear interest, at the Company's option, at the
alternate base rate or the reserve adjusted Euro-Dollar rate plus, in each
case, applicable margins of (i) in the case of tranche A term loans and
revolving loans (x) 2.50% for Euro-Dollar rate loans and (y) 1.50% for base
rate loans and (ii) in the case of tranche B term loans (x) 2.75% for Euro-
Dollar rate loans and (y) 1.75% for base rate loans. After the occurrence and
during the continuation of an event of default under the New Credit Agreement,
interest shall accrue at the rate for loans bearing interest at the rate
determined by reference to the base rate plus an additional 2.00% per annum
and shall be payable on demand.
The Company will pay commitment fees in an amount equal to 0.50% per annum
on the daily average unused portion of the revolving credit facility. Such
fees shall be payable quarterly in arrears and upon the maturity or
termination of the revolving credit facility.
67
<PAGE>
Beginning six months after the Closing Date, the applicable margins for the
tranche A term loans and revolving loans will be determined based on the ratio
of consolidated total debt to consolidated EBITDA of the Company and its
subsidiaries (as defined in the New Credit Facility).
The Company will pay a letter of credit fee calculated at a rate per annum
equal to the applicable margin for Euro-Dollar rate loans under the revolving
credit facility, which shall be shared by all Lenders, and an additional 0.25%
per annum, which shall be retained by the Lender issuing the letter of credit,
which percentage shall be multiplied by the amount available from time to time
for drawing under such letter of credit.
The New Credit Facility will be subject to the following amortization
schedule:
<TABLE>
<CAPTION>
REVOLVING
TRANCHE A TRANCHE B CREDIT
YEAR TERM LOANS TERM LOANS FACILITY
(%) (%) (%)
<S> <C> <C> <C>
1...................................... 0.0 1.0 0.0
2...................................... 0.0 1.0 0.0
3...................................... 10.0 1.0 10.0
4...................................... 12.5 1.0 12.5
5...................................... 15.0 1.0 15.0
6...................................... 17.5 1.0 17.5
7...................................... 20.0 1.0 20.0
8...................................... 25.0 1.0 25.0
9...................................... 92.0
----- ----- -----
100.0 100.0 100.0
</TABLE>
The New Credit Facility will be subject to mandatory prepayment: (i) with
the net after-tax cash proceeds of the sale or other disposition of any
property or assets of the Company or any of its subsidiaries in excess of $5
million per year, subject to certain exceptions, (ii) with 50% of the net cash
proceeds received from the issuance of equity securities of Holdings, or any
of its subsidiaries, (iii) with the net cash proceeds received from certain
issuances of debt securities by Holdings or any of its subsidiaries, (iv) with
50% of excess cash flow (as defined in the New Credit Facility) for each
fiscal year, payable within 90 days after the end of the applicable fiscal
year. All mandatory prepayment amounts shall be applied first to the
prepayment of the term loan facility and thereafter to the prepayment of the
revolving credit facility.
Holdings and all existing or future subsidiaries of the Company will be
guarantors of the New Credit Facility. The Company's obligations under the New
Credit Facility will be secured by: (i) all existing and after-acquired
personal property of the Company and the subsidiary guarantors, including a
pledge of all of the stock of all existing or future subsidiaries of the
Company, (ii) first-priority perfected liens on all existing and after-
acquired real property fee and leasehold interests of the Company and the
subsidiary guarantors, subject to customary permitted liens (as defined in the
New Credit Facility), (iii) a pledge by Holdings of the stock of the Company
and (iv) a negative pledge on all assets of the Company and its subsidiaries.
The New Credit Facility will contain customary covenants and restrictions on
the Company's ability to engage in certain activities, including, but not
limited to: (i) limitations on other indebtedness, liens, investments and
guarantees, (ii) restrictions on dividends and redemptions and payments on
subordinated debt and (iii) restrictions on mergers and acquisitions, sales of
assets and leases.
The New Credit Facility will also contain financial covenants requiring the
Company to maintain a minimum total debt service coverage test, a minimum
EBITDA test, a minimum interest coverage test, a minimum fixed charge coverage
test and a maximum leverage test.
Borrowing under the New Credit Facility is subject to significant
conditions, including consummation of the acquisition of Palmer and the sale
of Fort Myers (or arrangements satisfactory to the lenders under the New
Credit Facility for short-term financing bridging such sale) and the related
financing as described under "The Acquisition," and approval of final
documentation relating to both the Acquisition and the New Credit Facility. In
addition, borrowings under the New Credit Facility will be subject to
significant conditions, including compliance with certain financial ratios and
the absence of any material adverse change. See "Risk Factors--Leverage,
Liquidity and Ability to Meet Required Debt Service."
68
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued under the Indenture, dated as of July 10, 1997,
by and among the Company and Bank of Montreal Trust Company, as trustee (the
"Trustee"), which has been filed as an exhibit to the Registration Statement
of which this Prospectus constitutes a part. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by
reference to the TIA. The following summaries of certain provisions of the
Indenture are summaries only, do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of the Indenture.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Indenture. Wherever particular provisions of
the Indenture are referred to in this summary, such provisions are
incorporated by reference as a part of the statements made and such statements
are qualified in their entirety by such reference.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, if the Exchange
Offer is not consummated by January 6, 1998, Holders that have complied with
their obligations under the Registration Rights Agreement will be entitled,
subject to certain exceptions, to liquidated damages in an amount equal to
$0.05 per week per $1,000 principal amount of Old Notes held by such Holder
until April 6, 1998 and up to $0.25 per week per $1,000 principal amount of
Old Notes thereafter until the consummation of the Exchange Offer.
The Notes are general obligations of the Company and are subordinated in
right of payment to all Senior Indebtedness. As of June 30, 1997, on a pro
forma basis after giving effect to the Offering, the application of the
estimated net proceeds therefrom and the Acquisition described herein under
"Unaudited Pro Forma Condensed Consolidated Financial Statements," the Company
would have had $426.0 million aggregate principal amount of Senior
Indebtedness outstanding and no other Indebtedness other than the Notes. The
Company conducts significant operations through its subsidiaries and,
therefore, the Notes are effectively subordinated to all liabilities
(including trade payables) of the Company's subsidiaries. The Notes are issued
only in fully registered form, without coupons, in denominations of $1,000 and
integral multiples thereof.
The Notes will mature on July 15, 2007. The Notes bear interest at the rate
of 11 3/4% per annum from July 10, 1997 or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable semi-
annually on January 15 and July 15 of each year, commencing January 15, 1998
to the Persons in whose names such Notes are registered at the close of
business on the January 1 or July 1 preceding such Interest Payment Date.
The Indenture does not contain provisions which would afford Holders of the
Notes protection in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transactions involving the
Company.
Principal of, premium, liquidated damages, if any, and interest on the Notes
is payable, and, subject to the following provisions, the Notes may be
presented for registration of transfer or exchange, at the office or agency of
the Company maintained for such purpose, which office or agency shall be
maintained in the Borough of Manhattan of The City of New York. At the option
of the Company, payment of interest may be made by check mailed to the Holders
of the Notes at the addresses set forth upon the registry books of the
Company. No service charge will be made for any registration of transfer or
exchange of Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Until otherwise designated by the Company, the Company's office or agency will
be the corporate trust office of the Trustee presently located at 77 Water
Street, 4th Floor, New York, New York 10005, c/o Corporate Trust Department.
69
<PAGE>
SECURITY
The Indenture provides that the Company shall deposit into an account (the
"Account") the net proceeds of the Offering, plus an amount sufficient to pay
any required premium upon a Special Redemption and any accrued interest on the
Notes through December 31, 1997, to be pledged to the Trustee, for the benefit
of the Holders of the Notes, and invested in certain Eligible Investments in
which the Trustee, for the benefit of the Holders of the Notes, will have a
valid and perfected security interest. Pursuant to the Indenture, subject to
and contemporaneously upon (i) the closing of the merger of Palmer with and
into the Company (the "Palmer Acquisition"), (ii) the funding of at least
$325.0 million under a senior loan facility syndicated by DLJ Capital Funding
and (iii) the contribution to the Company of the PCC Equity Contribution, the
funds in the Account shall be released for the purpose of paying the required
cash consideration to acquire Palmer. In the event that the merger of the
Company into Palmer does not take place on or prior to the earlier of (i) the
determination by the Company, in its sole judgment, that the Palmer
Acquisition will not be consummated and (ii) December 31, 1997 (either (i) or
(ii), a "Date of Determination"), the funds in the Account will be released on
the Special Redemption Date for the purpose of effecting the mandatory
redemption (the "Special Redemption") of the Notes in accordance with the
requirements of the Indenture (see "--Special Redemption"). Any excess funds
remaining in the Account after consummation of the Palmer Acquisition or the
Special Redemption will be released to the Company. Funds held in the Account,
pending release for the uses set forth above, may be invested at the direction
of the Company in Eligible Investments maturing prior to December 31, 1997;
provided that such Eligible Investments shall be held in the Account and that
the Trustee, for the benefit of the Holders, shall have a valid and perfected
security interest in such Eligible Investments. See "--Special Redemption."
SUBORDINATION
The Indenture provides that no payment may be made by or on behalf of the
Company on account of the principal of, premium, if any, or interest on the
Notes (including any repurchase of any Notes) or on account of any other
monetary obligation for the payment of money due on the Notes, including the
redemption provisions of the Notes, for cash or property (other than Junior
Securities issued in connection with a reorganization pursuant to the
bankruptcy laws of any jurisdiction), (i) upon the maturity of any Senior
Indebtedness by lapse of time, acceleration (unless waived) or otherwise,
unless and until all principal of, premium, if any, and interest (and with
respect to the Credit Agreement, any other obligations) on such Senior
Indebtedness are first paid in full in cash or Cash Equivalents (or, with
respect to Senior Indebtedness other than the Credit Agreement, such payment
is duly provided for), or otherwise to the extent such holders expressly
acknowledge satisfaction of amounts due by settlement other than in cash or
Cash Equivalents, or (ii) in the event of default in the payment of any
principal of, premium, if any, or interest on Senior Indebtedness of the
Company when it becomes due and payable, whether at maturity, a scheduled
payment date, or at a date prepayment is required or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has
been cured or waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Senior Indebtedness (or a trustee or agent on
behalf of such holders) to declare such Senior Indebtedness to be due and
payable and (ii) written notice of such event of default given to the Trustee
by the holders (or a trustee, agent or other representative of such holders)
of an aggregate of at least $25.0 million principal amount outstanding of any
Designated Senior Indebtedness (a "Payment Notice"), then, unless and until
such event of default has been cured or waived or otherwise has ceased to
exist, no payment may be made by or on behalf of the Company on account of the
principal of, premium, if any, or interest on the Notes, or to repurchase any
of the Notes, or on account of any other obligation for the payment of money
in respect of the Notes, including the redemption provisions of the Notes, in
any such case (other than payments made with Junior Securities issued in
connection with a reorganization pursuant to the bankruptcy laws of any
jurisdiction). Notwithstanding the foregoing, unless the Senior Indebtedness
in respect of which such event of default exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is delivered
as set forth above (the "Payment Blockage Period") and such declaration has
not been rescinded or waived, at the end of the Payment Blockage Period, the
Company shall be required, unless the provisions described in the immediately
preceding paragraph
70
<PAGE>
are then applicable, to pay all sums not paid to the Holders of the Notes
during the Payment Blockage Period, due to the foregoing prohibitions and to
resume all other payments as and when due on the Notes. Any number of Payment
Notices may be given; provided, however, that (i) not more than one Payment
Notice shall be given within a period of any 360 consecutive days, and (ii) no
default that existed upon the date of such Payment Notice or the commencement
of such Payment Blockage Period (whether or not such event of default relates
to the same issue of Senior Indebtedness) shall be made the basis for the
commencement of any other Payment Blockage Period (it being acknowledged that
any subsequent action, or any breach of any financial covenant for a period
commencing after the expiration of such Payment Blockage Period that, in
either case, would give rise to a new event of default, even though it is a
breach pursuant to any provision under which a prior event of default
previously existed, shall constitute a new event of default for this purpose).
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities issued in
connection with a reorganization pursuant to the bankruptcy laws of any
jurisdiction) shall be received by the Trustee or the Holders at a time when
such payment or distribution is prohibited by the foregoing provisions, such
payment or distribution shall be held in trust for the benefit of the holders
of such Senior Indebtedness, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of such Senior Indebtedness
remaining unpaid (or, with respect to Senior Indebtedness other than the
Credit Agreement, unprovided for) or to their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness may have been
issued, ratably according to the aggregate principal amounts remaining unpaid
on account of such Senior Indebtedness held or represented by each, for
application to the payment of all such Senior Indebtedness remaining unpaid,
to the extent necessary to pay (or, with respect to Senior Indebtedness other
than the Credit Agreement to provide for the payment) of all such Senior
Indebtedness in full, or otherwise to the extent holders expressly acknowledge
satisfaction of amounts due after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshalling
of assets or liabilities, (i) the holders of all Senior Indebtedness of the
Company will first be entitled to receive payment in full in cash or Cash
Equivalents (or, with respect to Senior Indebtedness other than the Credit
Agreement to have such payment duly provided for), or, with respect to any
holder, otherwise to the extent such holder(s) expressly acknowledge
satisfaction of amounts due in settlement other than in cash or Cash
Equivalents (it being acknowledged that approval of a plan of reorganization
in a bankruptcy proceeding shall not constitute satisfaction of amounts due in
settlement), before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, and interest on the Notes (other than
Junior Securities issued in connection with a reorganization pursuant to the
bankruptcy laws of any jurisdiction) and (ii) any payment or distribution of
assets of the Company of any kind or character from any source, whether in
cash, property or securities (other than with Junior Securities issued in
connection with a reorganization pursuant to the bankruptcy laws of any
jurisdiction) to which the Holders or the Trustee on behalf of the Holders
would be entitled, except for the subordination provisions contained in the
Indenture, will be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of such Senior
Indebtedness or their representative to the extent necessary to make payment
in full on all such Senior Indebtedness remaining unpaid, after giving effect
to any concurrent payment or distribution to the holders of such Senior
Indebtedness.
No provision contained in the Indenture or the Notes affects the obligation
of the Company, which is absolute and unconditional, to pay, when due,
principal of, premium, if any, and interest on the Notes. The Subordination
provisions of the Indenture and the Notes do not prevent the occurrence of any
Default or Event of Default under the Indenture or limit the rights of the
Trustee or any Holder to pursue any other rights or remedies with respect to
the Notes.
As a result of the foregoing subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or any assignment for the benefit of the creditors
71
<PAGE>
of the Company or a marshalling of assets or liabilities of the Company,
Holders of the Notes may receive ratably less than other such creditors.
The Company conducts significant portions of its operations through its
subsidiaries. Accordingly, the Company's ability to meet its cash obligations
is dependent upon the ability of its subsidiaries to make cash distributions
to the Company. Furthermore, any right of the Company to receive the assets of
any of its subsidiaries upon any such subsidiary's liquidation (and the
consequent right of the Holders of the Notes to participate in the
distribution of the proceeds of those assets) effectively will be subordinated
by operation of law to the claims of such subsidiary's creditors (including
trade creditors) and holders of its preferred stock, except to the extent that
the Company is itself recognized as a creditor or preferred stockholder of
such subsidiary, in which case the claims of the Company would still be
subordinate to any indebtedness or preferred stock of such subsidiary senior
in right of payment to that held by the Company. As a result of the
subordination provisions described above, in the event of the liquidation,
bankruptcy, reorganization, insolvency, receivership or similar proceeding or
any assignment for the benefit of the creditors of the Company or a
marshalling of assets or liabilities of the Company, Holders of the Notes may
receive ratably less than other such creditors or interest holders.
SPECIAL REDEMPTION
In the event that the Palmer Acquisition has not been consummated on or
prior to the Date of Determination, the Company would be required to redeem
the Notes, on or before the Special Redemption Date, at a cash redemption
price of 101% of principal amount, plus accrued interest to the date of
redemption.
OPTIONAL REDEMPTION
The Company will not have the right to redeem any Notes prior to July 15,
2002. On or after July 15, 2002, the Company will have the right to redeem all
or any part of the Notes in cash at the redemption prices (expressed as a
percentage of the aggregate principal amount thereof) set forth below, in each
case including accrued and unpaid interest, if any, to the applicable
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that
is on or prior to the Redemption Date) if redeemed during the 12-month period
beginning July 15 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................... 105.875%
2003........................................................... 104.406%
2004........................................................... 102.938%
2005........................................................... 101.469%
2006 and thereafter............................................ 100.000%
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis or in such other manner as
it deems appropriate and fair. The Notes may be redeemed in part in multiples
of $1,000 only.
The Notes will not have the benefit of a sinking fund.
Subject to the following, notice of any redemption will be sent, by first-
class mail, at least 30 days and not more than 60 days prior to the date fixed
for redemption to the Holder of each Note to be redeemed to such Holder's last
address as then shown upon the books of the Registrar. Any notice which
relates to a Note to be redeemed in part only must state the portion of the
principal amount to be redeemed and must state that on and after the date
fixed for redemption, upon surrender of such Note, a new Note or Notes in a
principal amount equal to the unredeemed portion thereof will be issued. On
and after the date fixed for redemption, interest will cease to accrue on the
portions of the Notes called for redemption.
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Notwithstanding the Optional Redemption provisions above, prior to July 10,
2002, in the event that the Company or Parent consummates one or more
offerings of their Qualified Capital Stock on or before the third anniversary
of the date of issuance of the Notes, the Company may at its option, use all
or a portion of the cash contributed to it from such offerings to redeem up to
35% of the original aggregate principal amount of the Notes at a cash
redemption price equal to 111.75% of the principal amount of the Notes plus
accrued and unpaid interest thereon, if any, to the redemption date; provided
that at least 65% of the original aggregate principal amount of the Notes
remains outstanding thereafter.
CERTAIN COVENANTS
Transactions not Subject to Covenants. Notwithstanding anything to the
contrary in the Indenture, the following transactions shall not be prohibited
by the Indenture (regardless of the form or substance of the transaction or
series of transactions effecting the same):
(i) the Merger, including, without limitation, (A) payments made by the
Company to fund (x) the cash consideration payable in the Merger
(including, whether or not required by the Merger Agreement, pursuant to
statutory appraisal rights and any settlement thereof) to security holders
of Palmer and (y) fees and expenses incurred in connection with the Merger,
(B) the Incurrence, as a result of the Merger, of any Indebtedness of
Palmer or any subsidiary of Palmer, which Indebtedness was in existence
immediately prior to the Merger and not incurred in contemplation thereof,
(C) the assumption or the suffering to exist of any consensual encumbrance
or restriction on the ability of Palmer or any Subsidiary thereof to pay
dividends or make other distributions on the Capital Stock of any
Subsidiary or to pay or satisfy any obligation to Palmer or any of its
Subsidiaries or to otherwise transfer assets or make or pay loans or
advances to Palmer or any of its Subsidiaries, which encumbrance or
restriction was contained in an instrument that was in effect immediately
prior to the Merger and not put into place in contemplation thereof and (D)
the Incurrence or the suffering to exist of any Lien upon any of the
property or assets of Palmer or any of its Subsidiaries which Liens were in
existence immediately prior to the effectiveness of the Merger and not
imposed in contemplation thereof; and
(ii) any transaction involving FMT Ltd. (the partnership that holds the
system serving Ft. Myers) or any subsidiary of FMT Ltd. or any of their
assets or the Company's partnership interest in FMT Ltd. (each "FMT-Related
Assets") provided that, in the case of this clause (ii), no such
transaction shall (a) in and of itself cause or result in an increase in
the consolidated Indebtedness of the Company and its Restricted
Subsidiaries on and after the 45th day after the Merger Date from that
existing immediately prior to such transaction, (b) cause or result in the
sale of any asset of the Company other than FMT-Related Assets, (c) cause
or result in the imposition of any Lien on any property or assets of the
Company or any of its Restricted Subsidiaries other than solely upon an
FMT-Related Asset, (d) cause or result in the imposition of any encumbrance
or restriction on the ability of any Restricted Subsidiary of the Company
(other than FMT Ltd. or any subsidiary thereof) to pay dividends or make
other distributions on the Capital Stock of any Restricted Subsidiary of
the Company or pay or satisfy any obligation to the Company or any of its
Restricted Subsidiaries or otherwise transfer assets or make or pay loans
or advances to the Company or any of its Restricted Subsidiaries, (e) cause
or result in any dividend or distribution by the Company or any Investment
in any Person except a Restricted Subsidiary or a Subsidiary of FMT Ltd. or
(f) cause or result in the Incurrence of any Indebtedness of the Company
ranking senior to the Notes but junior to any Senior Indebtedness;
provided, however, that prior to the 45th day after the Merger Date the
Company's consolidated Indebtedness may increase as a result of such
transaction by no more than $169 million (plus accrued interest thereon).
Notwithstanding the foregoing provisions of this covenant, neither the
Company nor any of its Restricted Subsidiaries (other than FMT Ltd. or any
of its Subsidiaries) shall make any Investment in FMT Ltd. or any of its
Subsidiaries.
In addition, the Merger shall not constitute a Change of Control and no
transaction described in clause (ii), above, shall be taken into account in
any calculation under "--Limitation on Restricted Payments."
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Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional offer by the Company (the "Change
of Control Offer"), to require the Company to repurchase all or any part
(equal to $1,000 principal amount or an integral multiple thereof) of such
Holder's Notes, on a date (the "Change of Control Purchase Date") that is no
later than 45 Business Days after the occurrence of such Change of Control at
a cash price (the "Change of Control Purchase Price") equal to 101% of the
aggregate principal amount thereof, together with any accrued and unpaid
interest to the Change of Control Purchase Date. The Indenture provides that,
prior to the commencement of a Change of Control Offer, but in any event
within 30 days following any Change of Control, the Company covenants to, if
at such time the terms of the Credit Agreement require repayment upon a Change
of Control, (i) repay in full and terminate all commitments and Indebtedness
under the Credit Agreement or, (ii)(A) offer to repay in full and terminate
all commitments and all Indebtedness under the Credit Agreement and (B) repay
the Indebtedness owed to each such lender that has accepted such offer or
(iii) obtain the requisite consents under the Credit Agreement to waive the
provisions of this sentence. The Company's failure to comply with the
preceding sentence shall constitute an Event of Default described in clause
(iii) and not in clause (ii) under "Events of Default," below. The Change of
Control Offer shall be made within 20 Business Days following a Change of
Control and shall remain open for 20 Business Days following its commencement
(the "Change of Control Offer Period"). Upon expiration of the Change of
Control Offer Period, the Company shall purchase all Notes properly tendered
in response to the Change of Control Offer.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest) of all Notes so tendered and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate listing the Notes or portions
thereof being purchased by the Company. The Paying Agent promptly will deliver
to the Holders of Notes so accepted payment in an amount equal to the Change
of Control Purchase Price (together with any accrued and unpaid interest), and
the Trustee will promptly authenticate and mail or deliver to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will announce publicly the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company or its Parent, and, thus, the removal
of incumbent management. The Change of Control purchase feature resulted from
negotiations between the Company, its Parent and the Initial Purchasers and is
not the result of any intention on the part of the Company or its Parent or
their management to discourage the acquisition of the Company or its Parent.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws and the Company may modify a Change of Control Offer to
the extent necessary to effect such compliance.
Limitation on Incurrence of Additional Indebtedness
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
issue, create, incur, assume, guarantee or otherwise directly or indirectly
become liable for (including as a result of an acquisition), or otherwise
become responsible for, contingently or otherwise (individually or
collectively, to "Incur" or, as appropriate, an "Incurrence"), any
Indebtedness. Neither the accrual of interest (including the issuance of "pay
in kind" securities or similar instruments in respect of such accrued
interest) pursuant to the terms of Indebtedness Incurred in compliance
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with this covenant, nor the accretion of original issue discount, nor the mere
extension of the maturity of any Indebtedness shall be deemed to be an
Incurrence of Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may incur
Indebtedness if the Company's Annualized Operating Cash Flow Ratio, after
giving effect to the Incurrence of such Indebtedness, would have been less
than 8 to 1.
In addition, if there exists no Default or Event of Default immediately
prior and subsequent thereto, the foregoing limitations will not apply to the
Incurrence of (i) Indebtedness by the Company or any of its Restricted
Subsidiaries constituting Existing Indebtedness, reduced by repayments of and
permanent reductions in commitments in satisfaction of the Net Cash Proceeds
application requirement set forth in the "Limitation on Asset Sales and Sales
of Subsidiary Stock" covenant and by repayments and permanent reductions in
amounts outstanding pursuant to scheduled amortization and mandatory
prepayments in accordance with the terms thereof, (ii) Indebtedness, in an
aggregate principal amount not in excess of $525,000,000, permitted under the
Credit Agreement, reduced by (a) repayments of and permanent reductions in
commitments in satisfaction of the Net Cash Proceeds application requirement
set forth in the "Limitation on Asset Sales and Sales of Subsidiary Stock"
covenant and (b) an amount equal to the aggregate amount of Indebtedness
Incurred pursuant to clause (x), below, so long as such amounts Incurred
pursuant to clause (x) remain outstanding; provided that, if there exists a
Default or an Event of Default immediately prior or subsequent thereto, the
Company and its Restricted Subsidiaries may Incur Indebtedness pursuant to
this clause (ii) so long as the proceeds from such Incurrence are not used
directly to pay any amounts owing in respect of any Indebtedness, including,
without limitation, principal, interest and commitment fees, other than with
respect to the Notes and the Holdings Securities, (iii) Indebtedness by the
Company evidenced by the Notes, (iv) (A) Permitted Acquisition Indebtedness by
the Company that satisfies the provisions of clause (x) of the definition
thereof or (B) Permitted Acquisition Indebtedness by any Restricted Subsidiary
that satisfies the provisions of clause (y) of the definition thereof, (v)
Indebtedness between the Company and any Restricted Subsidiary of the Company
or between Restricted Subsidiaries of the Company, provided that, in the case
of Indebtedness of the Company, such obligations shall be unsecured and
subordinated in all respects to the Holders' rights pursuant to the Notes, and
the date of any event that causes a Restricted Subsidiary no longer to be a
Restricted Subsidiary shall be an Incurrence Date with respect to such
Indebtedness, (vi) Capitalized Lease Obligations and Purchase Money
Indebtedness in an aggregate amount or aggregate principal amount, as the case
may be, outstanding at any time not to exceed in the aggregate $15,000,000,
provided that in the case of Purchase Money Indebtedness, such Indebtedness
shall not constitute less than 75% nor more than 100% of the cost (determined
in accordance with GAAP) to the Company or such Restricted Subsidiary of the
property purchased or leased with the proceeds thereof, (vii) Indebtedness of
the Company or any Restricted Subsidiary arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company to the extent none of
the foregoing results in the obligation to repay an obligation for money
borrowed by any Person and are limited in aggregate amount to no greater than
10% of the fair market value of such business, assets or Restricted Subsidiary
so disposed of, (viii) any guarantee by any Restricted Subsidiary of any
Senior Indebtedness Incurred in compliance with this covenant, (ix)
Indebtedness of the Company or any Restricted Subsidiary under standby letters
of credit or reimbursement obligations with respect thereto issued in the
ordinary course of business and consistent with industry practices limited in
aggregate amount to $5,000,000 at any one time outstanding, (x) Indebtedness
of the Company (other than Indebtedness permitted by clauses (i) through (ix)
or (xi) hereof) not to exceed $100,000,000 at any one time outstanding and
(xi) Refinancing Indebtedness Incurred to extend, renew, replace or refund
Indebtedness permitted under clauses (i) (as so reduced in amount), (ii) (as
so reduced in amount), (iii), (iv) and (xi) of this paragraph.
Indebtedness of any Person that is not a Restricted Subsidiary of the
Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of
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the Company or is merged with or into or consolidated with the Company or a
Restricted Subsidiary of the Company shall be deemed to have been Incurred, as
the case may be, at the time such Person becomes such a Restricted Subsidiary
of the Company, or is merged with or into or consolidated with the Company or
a Restricted Subsidiary of the Company.
Limitation on Restricted Payments
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
make any Restricted Payment, if, immediately prior or after giving effect
thereto (a) a Default or an Event of Default would exist, (b) the Company's
Annualized Operating Cash Flow Ratio for the Reference Period would exceed 8.5
to 1, or (c) the aggregate amount of all Restricted Payments made by the
Company and its Restricted Subsidiaries, including such proposed Restricted
Payment (if not made in cash, then the fair market value of any property used
therefor, as determined in good faith by the Board of Directors) from and
after the Issue Date and on or prior to the date of such Restricted Payment,
shall exceed the sum of (i) the amount determined by subtracting (x) 2.0 times
the aggregate Consolidated Interest Expense of the Company for the period
(taken as one accounting period) from the Issue Date to the last day of the
last full fiscal quarter prior to the date of the proposed Restricted Payment
(the "Computation Period") from (y) Operating Cash Flow of the Company for the
Computation Period, plus (ii) the aggregate Net Proceeds (other than with
respect to the PCC Equity Contribution) received by the Company from the sale
(other than to a Subsidiary of the Company) of its Qualified Capital Stock
after the Issue Date and on or prior to the date of such Restricted Payment,
plus (iii) to the extent not otherwise included in clauses (i) or (ii), above,
an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from payments of dividends, repayment of loans or
advances, or other transfers of assets, in each case to the Company or any
Wholly Owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company and any Restricted
Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing paragraph, the provisions set forth in clause
(b) or (c) of the immediately preceding paragraph will not prohibit (i) the
use of an aggregate of $10,000,000 to be used for Restricted Payments not
otherwise permitted by this "Limitation on Restricted Payments" covenant, (ii)
the distribution of amounts to Holdings sufficient to pay the scheduled
interest or dividends, as applicable, owed by Holdings on the Holdings
Securities as such interest or dividends become due and payable and so long as
(A) Holdings is the direct Parent of the Company owning 100% of the capital
stock of the Company and (B) such Holdings Securities contain no scheduled
requirement for the payment of cash interest or dividends, as applicable,
until at least five years from the date of their original issuance and (iii)
any dividend, distribution or other payment by any Restricted Subsidiary on
shares of its Capital Stock that is paid pro rata to all holders of such
Capital Stock, and notwithstanding the foregoing paragraph, the provisions set
forth in clause (a), (b) or (c) of the immediately preceding paragraph will
not prohibit (iv) the payment of any dividend within 60 days after the date of
its declaration if such dividend could have been made on the date of its
declaration in compliance with the foregoing provisions, or (v) the
redemption, defeasance, repurchase or other acquisition or retirement of any
Indebtedness or Capital Stock of the Company or its Restricted Subsidiaries
either in exchange for or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of Qualified
Capital Stock (in the case of any redemption, defeasance, repurchase or other
acquisition or retirement of any Junior Indebtedness or Capital Stock of the
Company or its Restricted Subsidiaries) or Junior Indebtedness (in the case of
any redemption, defeasance, repurchase or other acquisition or retirement of
any Indebtedness of the Company or its Restricted Subsidiaries) of the
Company.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this description of the
"Limitations on Restricted Payments" covenant, 100% of the amounts expended
under clauses (i) through (v) of the immediately preceding paragraph shall be
deducted.
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Limitation on Layering Indebtedness
The Indenture provides that the Company will not incur or suffer to exist
any Indebtedness that is subordinate in right of payment to any other
Indebtedness of the Company, unless, by its terms, such Indebtedness is
subordinate in right of payment to, or ranks pari passu with, the Notes.
Limitation on Restricting Subsidiary Dividends
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, with respect to securities issued directly
thereby or with respect to which they are obligors, directly or indirectly,
create, assume or suffer to exist any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company to pay dividends or
make other distributions on the Capital Stock of any Restricted Subsidiary of
the Company or pay or satisfy any obligation to the Company or any of its
Restricted Subsidiaries or otherwise transfer assets or make or pay loans or
advances to the Company or any of its Restricted Subsidiaries, except
encumbrances and restrictions existing under (i) the Indenture and the Notes,
(ii) any Existing Indebtedness, (iii) the Credit Agreement, (iv) any
applicable law or any governmental or administrative regulation or order, (v)
Refinancing Indebtedness permitted under the Indenture, provided that the
restrictions contained in the instruments governing such Refinancing
Indebtedness are no more restrictive in the aggregate than those contained in
the instruments governing the Indebtedness being refinanced immediately prior
to such refinancing, (vi) restrictions with respect solely to a Restricted
Subsidiary of the Company imposed pursuant to a binding agreement which has
been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Restricted Subsidiary, provided such
restrictions apply solely to the Capital Stock or assets being sold of such
Restricted Subsidiary, (vii) restrictions contained in any agreement relating
to the financing of the acquisition of a Person or real or tangible personal
property after the Issue Date which are not applicable to any Person or
property, other than the Person or property so acquired and which either
(A) were not put in place in anticipation of or in connection with such
acquisition or (B) constituted Permitted Acquisition Indebtedness of a Person
satisfying the provisions of clause (y) of the definition thereof or (viii)
any agreement (other than those referred to in clause (vii)) of a Person
acquired by the Company or a Restricted Subsidiary of the Company, which
restrictions existed at the time of acquisition and were not put in place in
anticipation of or in connection with such acquisition. Notwithstanding the
foregoing, neither (a) customary provisions restricting subletting or
assignment of any lease entered into the ordinary course of business,
consistent with past practices nor (b) Liens on assets securing Senior
Indebtedness, shall in and of themselves be considered a restriction on the
ability of the applicable Restricted Subsidiary to transfer such agreement or
assets, as the case may be.
Limitation on Transactions with Related Persons
The Indenture provides that, after the Issue Date, the Company will not, and
will not permit any of its Restricted Subsidiaries or Unrestricted
Subsidiaries to, enter into any contract, agreement, arrangement or
transaction with any Related Person (each a "Related Person Transaction"), or
any series of Related Person Transactions, except for transactions made in
good faith, the terms of which are (i) fair and reasonable to the Company or
such Subsidiary, as the case may be, and (ii) are at least as favorable as the
terms which could be obtained by the Company or such Subsidiary, as the case
may be, in a comparable transaction made on an arm's length basis with Persons
who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction or series
of Related Person Transactions with an aggregate value in excess of $1,000,000
must first be approved by a majority of the Board of Directors of the Company
who are disinterested in the subject matter of the transaction pursuant to a
Board Resolution, and (b) with respect to any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$5,000,000, the Company must first obtain a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
financial point of view of such transaction to the Company or such Subsidiary,
as the case may be.
Notwithstanding the foregoing, the following shall not constitute Related
Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
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Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons, as
directors, officers or employees, (ii) any contract, agreement, arrangement,
or transaction solely between or among the Company and any of its Restricted
Subsidiaries or between or among Restricted Subsidiaries of the Company, (iii)
any Restricted Payment of the type described by clauses (i) and (ii) of the
definition thereof made to all stockholders on a pro rata basis and not
prohibited by the "Limitation on Restricted Payments" covenant, (iv) any loan
or advance by the Company or a Restricted Subsidiary to employees of the
Company or a Restricted Subsidiary in the ordinary course of business, in an
aggregate amount at any one time outstanding not to exceed $500,000 and (v)
any payment pursuant to a tax-sharing agreement between the Company and any
other Person with which the Company is required or permitted to file a
consolidated tax return or with which the Company is or could be part of a
consolidated group for tax purposes, which payments are not in excess of the
tax liabilities attributable solely to the Company and its Restricted
Subsidiaries (as a consolidated group).
Limitation on Asset Sales and Sales of Subsidiary Stock
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of its property, businesses or assets, including
by merger or consolidation, and including any sale or other transfer or
issuance of any Capital Stock of any Restricted Subsidiary of the Company,
whether by the Company or a Restricted Subsidiary (an "Asset Sale"), unless
(1) (a) within 360 days after the date of such Asset Sale, an amount equal to
the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to
the optional redemption of the Notes in accordance with the terms of the
Indenture and other Indebtedness of the Company ranking on a parity with the
Notes from time to time outstanding with similar provisions requiring the
Company to make an offer to purchase or to redeem such Indebtedness with the
proceeds from asset sales, pro rata in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an
original issue discount) of the Notes and such other Indebtedness then
outstanding or to the repurchase of the Notes and such other Indebtedness
pursuant to an irrevocable, unconditional offer (pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Notes and such other
Indebtedness then outstanding) (the "Asset Sale Offer") to repurchase such
Indebtedness at a purchase price (the "Asset Sale Offer Price") of 100% of the
principal amount thereof in the case of the Notes or 100% of the principal
amount of such other Indebtedness (or accreted value in the case of
Indebtedness issued with an original issue discount) plus, in each case,
accrued interest to the date of payment, made within 330 days of such Asset
Sale, or (b) within 330 days of such Asset Sale, the Asset Sale Offer Amount
is (i) invested (or committed, pursuant to a binding commitment subject only
to reasonable, customary closing conditions, to be invested, and in fact is so
invested, within an additional 90 days) in tangible assets and property (other
than notes, obligations or securities), which in the good faith reasonable
judgment of the Board of Directors of the Company are of a type used in a
Related Business, or Capital Stock of a Person (which, if such Person becomes
a Subsidiary of the Company by virtue of such Asset Sale, shall initially be
designated a Restricted Subsidiary) all or substantially all of whose assets
and property (in the good faith reasonable judgment of the Board of Directors
of the Company) are of a type used in a Related Business ( provided that, with
respect to such Capital Stock, all of the requirements of the last proviso of
clause (v) of the following paragraph shall have been satisfied) or (ii) used
to retire permanently Senior Indebtedness or Indebtedness of a Restricted
Subsidiary, (2) with respect to any transaction or related series of
transactions of securities, property or assets with an aggregate fair market
value in excess of $1,000,000, at least 75% of the value of consideration for
the assets disposed of in such Asset Sale (excluding (a) Senior Indebtedness
(and any Refinancing Indebtedness issued to refinance any such Indebtedness)
or the Indebtedness of any Restricted Subsidiary assumed by a transferee which
assumption permanently reduces the amount of Indebtedness outstanding on the
Issue Date and permitted to have been Incurred pursuant to the covenant
"Limitation on Incurrence of Additional Indebtedness" (including that in the
case of a revolver or similar arrangement that makes credit available, such
commitment is permanently reduced by such amount), (b) Purchase Money
Indebtedness secured exclusively by the assets subject to such Asset Sale
which is assumed by a transferee and (c) marketable securities that are
promptly converted into cash or Cash Equivalents) consists of cash or Cash
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Equivalents, provided that any cash or Cash Equivalents received within 12
months following any such Asset Sale upon conversion of any property or assets
(other than in the form of cash or Cash Equivalents) received in consideration
of such Asset Sale shall be applied promptly in the manner required of Net
Cash Proceeds of any such Asset Sale as set forth above, (3) no Default or
Event of Default shall occur or be continuing after giving effect to, on a pro
forma basis, such Asset Sale, unless such Asset Sale is in consideration
solely of cash or Cash Equivalents and such consideration is applied
immediately to the permanent reduction of the principal amount of Indebtedness
outstanding pursuant to the Credit Agreement, and (4) the Board of Directors
of the Company determines in good faith that the Company or such Restricted
Subsidiary, as applicable, would receive fair market value in consideration of
such Asset Sale. The Indenture provides that an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in (1) (b) above exceeds $5,000,000 and that each Asset
Sale Offer shall remain open for 20 Business Days following its commencement
and no longer, except as otherwise required by applicable law (the "Asset Sale
Offer Period"). Upon expiration of the Asset Sale Offer Period, the Company
shall apply the Asset Sale Offer Amount, plus an amount equal to accrued
interest to the purchase of all Indebtedness properly tendered (on a pro rata
basis as described above if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course of
business;
(ii) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the "Limitation on Mergers, Sales or Consolidations";
(iii) the Company and its Restricted Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Restricted Subsidiary, as
applicable;
(iv) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets to the Company or any of
its Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, upon receipt of a favorable written opinion by an independent
financial advisor of national reputation as to the fairness from a
financial point of view to the Company or such Restricted Subsidiary of the
proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or Capital
Stock of a Person all or substantially all of whose assets, are of a type
used in a Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of
the Company by virtue of such Asset Sale), or a combination of any such
property, businesses or assets, or Capital Stock of such a Person and cash
or Cash Equivalents; provided that (i) there shall not exist immediately
prior or subsequent thereto a Default or an Event of Default, (ii) a
majority of the independent directors of the Board of Directors of the
Company shall have approved a resolution of the Board of Directors that
such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant to
any such exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the provisions of the
immediately preceding paragraph of this covenant; and provided, further,
that any Capital Stock of a Person received in an Asset Sale pursuant to
this clause (v) shall be owned directly by the Company or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person already
owned by the Company and its Restricted Subsidiaries, shall constitute a
majority of the voting power and Capital Stock of such Person, unless (A)
(i) the Company has received a binding commitment from such Person (or the
direct or indirect parent of such Person) that such Person (or the direct
or indirect parent of such Person) will distribute to the Company in cash
an amount equal to the Company's Annualized Operating Cash Flow (determined
as of the date of such Asset Sale) attributable to the property, business
or assets of the Company and its Restricted Subsidiaries exchanged in
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connection with such Asset Sale during each consecutive 12-month period
subsequent to such Asset Sale (unless and until the Company shall have sold
all of such Capital Stock, provided that the provisions of clause (B)
below, if applicable, shall have been satisfied), (ii) immediately after
such Asset Sale the aggregate number of Net Pops of the wireless
communications systems in which the Company or any of its Restricted
Subsidiaries has ownership interests ("Company Systems") that are owned
directly by a Person or Persons a majority of whose voting power and
Capital Stock is owned directly or indirectly by the Company is no less
than 80% of the aggregate number of Net Pops of Company Systems immediately
prior to such Asset Sale and (iii) upon consummation of such Asset Sale, on
a pro forma basis, the ratio of such Person's Annualized Operating Cash
Flow to the product of Consolidated Interest Expense for the Reference
Period multiplied by four (but excluding from Consolidated Interest Expense
all amounts that are not required to be paid in cash on a current basis)
shall be at least 1 to 1, or (B) in the case of Capital Stock of a Person
that is not a Subsidiary of the Company owned by the Company or a
Restricted Subsidiary that is exchanged (the "Exchanged Capital Stock") for
Capital Stock of another Person all or substantially all of whose assets
are of a type used in a Related Business, either (i) the Exchanged Capital
Stock shall not have been acquired prior to such Asset Sale in reliance
upon clause (A) of this proviso or (ii) the requirements of subclauses (A)
(i) (based on the original guaranteed cash flow) and (A) (iii) shall be
satisfied with respect to any Capital Stock acquired in consideration of
the Exchanged Capital Stock.
Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to clause
(c) of, the "Limitation on Restricted Payments" covenant, without giving
effect to clause (i) of the second paragraph thereof, shall not be deemed to
be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
Limitations on Liens
The Indenture provides that the Company will not and will not permit any
Restricted Subsidiary, directly or indirectly, to Incur or suffer to exist any
Lien (other than Permitted Liens) upon any of its property or assets, whether
now owned or hereafter acquired.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Restricted Subsidiaries from
becoming "investment companies" (as that term is defined in the Investment
Company Act of 1940, as amended), or from otherwise becoming subject to
regulation under the Investment Company Act.
Limitation on Merger, Sale or Consolidation
The Indenture provides that the Company will not consolidate with or merge
with or into another Person, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another Person or group of affiliated Persons, unless (i) either (a) the
Company is the continuing entity or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in connection
with the Notes and the Indenture; (ii) no Default or Event of Default shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; (iii) (A) immediately after giving effect to such
transaction on a pro forma basis, the consolidated resulting surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash
Flow Ratio provision set forth in the second paragraph of the "Limitation on
Incurrence of Additional Indebtedness" covenant or (B), if the requirement of
clause (A) is not satisfied, (x) any Indebtedness of the resulting surviving
or transferee entity in excess of the amount of the Company's Indebtedness
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immediately prior to such transaction is Permitted Acquisition Indebtedness
and (y) the requirement of clause (A) is not satisfied solely due to the
Incurrence of such Permitted Acquisition Indebtedness; and (iv) the Company
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, if applicable, confirming compliance with the requirements of this
covenant.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation had been named therein
as the Company, and the Company shall be released from the obligations under
the Notes and the Indenture.
Limitation on Lines of Business
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries shall directly or indirectly engage in any line or lines of
business activity other than that which, in the reasonable, good faith
judgment of the Board of Directors of the Company, is a Related Business.
Restriction on Sale and Issuance of Subsidiary Stock
The Indenture provides that the Company will not sell, and will not permit
any of its Restricted Subsidiaries to issue or sell, any shares of Capital
Stock of any Restricted Subsidiary of the Company to any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company, except for
shares of common stock with no preferences or special rights or privileges and
with no redemption or prepayment provisions ("Special Rights"); provided that,
in the case of a Restricted Subsidiary that is a partnership or joint venture
partnership (a "Restricted Partnership") the Company or any of its Restricted
Subsidiaries may sell or such Restricted Partnership may issue or sell Capital
Stock of such Restricted Partnership with Special Rights no more favorable
than those held by the Company or such Restricted Subsidiary in such
Restricted Partnership.
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15 (d) of the Exchange Act, the
Company shall deliver to the Trustee and to each Holder, within 15 days after
it is or would have been required to file such with the Commission, annual and
quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission,
if the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such
would be required in such reports to the Commission, and in each case,
together with a management's discussion and analysis of financial condition
and results of operations which would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Notes as and when the same becomes
due and payable and the continuance of any such failure for 30 days, (ii) the
failure by the Company to pay all or any part of the principal, or premium, if
any, on the Notes when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
payment of the Change of Control Purchase Price or the Asset Sale Offer Price,
(iii) the failure by the Company to observe or perform any other covenant or
agreement contained in the Notes or the Indenture and, subject to certain
exceptions, the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in aggregate principal amount of
the Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Restricted
Subsidiaries, (v) the failure to
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pay at final stated maturity (giving effect to any applicable grace periods
and any extensions thereof) the principal amount of any Indebtedness of the
Company or any Restricted Subsidiary of the Company or the acceleration of the
final stated maturity of any Indebtedness if the aggregate principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final maturity or
which has been accelerated, aggregates $15,000,000 or more at any time, and
(vi) final unsatisfied judgments not covered by insurance aggregating in
excess of $5,000,000, at any one time rendered against the Company or any of
its Restricted Subsidiaries and not stayed, bonded or discharged within 60
days. The Indenture will provide that if a default occurs and is continuing,
the Trustee must, within 90 days after the occurrence of such default, give to
the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above) relating to the Company or any
Restricted Subsidiary, then in every such case, unless the principal of all of
the Notes shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of the Notes then outstanding, by
notice in writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and accrued interest thereon
to be due and payable and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or five business days after receipt
by the Company and the representative of the holders of the Indebtedness under
the Credit Agreement of the Acceleration Notice, but only if such Event of
Default is then continuing. If an Event of Default specified in clause (iv)
above, relating to the Company or any significant Restricted Subsidiary
occurs, all principal and accrued interest thereon will be immediately due and
payable on all outstanding Notes without any declaration or other act on the
part of Trustee or the Holders. The Holders of a majority in aggregate
principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Notes which have become
due solely by such acceleration, have been cured or waived.
The Indenture provides that in the event of a declaration of acceleration of
the Notes because an Event of Default has occurred and is continuing as a
result of the acceleration of any Indebtedness described in clause (v) of the
first paragraph under "--Events of Default and Remedies," the declaration of
acceleration of the Notes shall be automatically annulled if the holders of
all Indebtedness described in clause (v) (without any payment to any holders
of any such Indebtedness) have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction and (ii) all
Events of Default, except nonpayment of principal or interest on the Notes
that became due solely because of the acceleration of the Notes, have been
cured or waived.
The Holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of or interest on any Note not yet cured,
or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented, and
the Indenture shall cease to be of further effect as to all outstanding Notes,
except as to (i) rights of Holders to receive
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payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust funds; (ii) the Company's
obligations with respect to such Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes, and the
maintenance of an office or agency for payment and money for security payments
held in trust; (iii) the rights, powers, trust, duties, and immunities of the
Trustee, and the Company's obligations in connection therewith; and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. Legal Tender, non-callable government
securities or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on such Notes on the
stated date for payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such Notes, and
the Holders of Notes must have a valid, perfected, exclusive security interest
in such trust; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
Federal income tax law, in each case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance, and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the Holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
of such Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; and (vii) the Company shall have delivered to the Trustee
an Officers' Certificate stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company and the Trustee are permitted to amend or supplement the Indenture
or any supplemental indenture or modify the rights of the Holders; provided
that no such modification may, without the consent of each Holder affected
thereby: (i) change the Stated Maturity of any Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or
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impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or
after the Redemption Date), or reduce the Change of Control Purchase Price or
the Asset Sale Offer Price or alter the security or redemption provisions or
the provisions of the "Repurchase of Notes at the Option of the Holder Upon a
Change of Control" covenant in a manner adverse to the Holders, or (ii) reduce
the percentage in principal amount of the outstanding Notes, the consent of
whose Holders is required for any such amendment, supplemental indenture or
waiver provided for in the Indenture, or (iii) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Note affected thereby. With the
consent of Holders of two-thirds of the outstanding aggregate principal amount
of the Notes, the Company and the Trustee are permitted to change the Change
of Control Purchase Date or the Asset Sale Offer Period.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company or any
successor entity shall have any personal liability in respect of the
obligations of the Company under the Indenture or the Notes by reason of his
or its status as such stockholder, employee, officer or director.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms contained in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of
this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of
such Person (on a fully diluted basis) or of warrants or other rights to
acquire such equity (whether or not presently exercisable).
"Annualized Operating Cash Flow" on any date, means with respect to any
Person the Operating Cash Flow for the Reference Period multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the
Transaction Date (after giving pro forma effect to the Incurrence of such
Indebtedness) divided by (ii) the aggregate amount of Annualized Operating
Cash Flow of such Person (determined on a pro forma basis after giving effect
to all acquisitions or dispositions of businesses made by such Person and its
Subsidiaries from the beginning of the Reference Period through the
Transaction Date as if such acquisition or disposition had occurred at the
beginning of such Reference Period); provided, that for purposes of such
computation, in calculating Annualized Operating Cash Flow and consolidated
Indebtedness, (a) the transaction giving rise to the need to calculate the
Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a
pro forma basis) on the first day of the Reference Period; (b) the incurrence
of any Indebtedness during the Reference Period or subsequent thereto and on
or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to retire Indebtedness or to acquire businesses)
will be assumed to have occurred (on a pro forma basis) on the first day of
such Reference Period; (c) Consolidated Interest Expense attributable to any
Indebtedness (whether existing or being incurred) bearing a floating interest
rate shall be computed as if the rate in effect on the Transaction Date had
been the applicable rate for the entire period; and (d) all members of the
consolidated group of such Person on the Transaction Date that were acquired
during the Reference Period shall
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be deemed to be members of the consolidated group of such Person for the
entire Reference Period. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and
its Subsidiaries in the foregoing definition shall be deemed to refer to the
Company and its Restricted Subsidiaries.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of such
Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each
general and limited partnership interest of such Person if such Person is a
partnership.
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments
in money market funds substantially all of whose assets comprise securities of
the types described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the
assets of the Company or Parent, on a consolidated basis, in one transaction
or a series of related transactions, if, immediately after giving effect to
such transaction, any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than an Excluded Person or Excluded Group, is or becomes the "beneficial
owner" (as such term is used in Rule 13d-3 promulgated pursuant to the
Exchange Act), directly or indirectly, of more than 50% of the equity of the
transferee, (ii) any person or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than an Excluded Person or Excluded Group, is or becomes the "beneficial
owner" (as such term is used in Rule 13d-3 promulgated pursuant to the
Exchange Act), directly or indirectly, of more than 50% of the equity of the
Company or Parent then outstanding normally entitled to vote in elections of
directors, or (iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Company or Parent (together with any new
directors whose election by such Board or whose nomination for election by the
shareholders of the Company or Parent was approved by a vote of a majority of
the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company or Parent then in office.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to the Capitalized Lease
Obligations) of such Person and its consolidated Subsidiaries during such
period, including (i) original issue discount and non-cash interest payments
or accruals on any Indebtedness, (ii) the interest portion of all deferred
payment obligations, and (iii) all commissions, discounts and other fees and
charges owed with respect to bankers' acceptances and letters of credit
financings and currency and Interest Swap and Hedging Obligations, in each
case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable by such Person or any of its consolidated
Subsidiaries in respect of Preferred Stock (other than by Restricted
Subsidiaries of such Person to such Person or such Person's Wholly Owned
Subsidiaries).
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For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
by the Company to be the rate of interest implicit in such Capitalized Lease
Obligation in accordance with GAAP and (y) interest expense attributable to
any Indebtedness represented by the guaranty by such Person or a Subsidiary of
such Person of an obligation of another Person shall be deemed to be the
interest expense attributable to the Indebtedness guaranteed. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its consolidated Subsidiaries for such period,
determined (on a consolidated basis) in accordance with GAAP, adjusted to
exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains and losses and gains and
losses that are nonrecurring (including as a result of Asset Sales outside the
ordinary course of business), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has
an interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during
such period and (y) when taken together with all other dividends and
distributions paid during such period in cash to such Person or a Subsidiary
of such Person, are not in excess of such Person's pro rata share of such
other Person's aggregate net income earned during such period, (iii), except
as provided in the definition of "Annualized Operating Cash Flow Ratio," the
net income (or loss) of any Subsidiary acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (iv) the
net income, if positive, of any Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or any agreement or
instrument applicable to such Subsidiary. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries,
references to a Person and its Subsidiaries in the foregoing definition shall
be deemed to refer to the Company and its Restricted Subsidiaries.
"Credit Agreement" means, the Credit Agreement described under "Description
of New Credit Facility," or any other senior loan facility syndicated by DLJ
Capital Funding in lieu thereof, together with the related documents thereto
(including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring or adding Restricted Subsidiaries of the
Issuer as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders. There can only be one such credit facility or loan agreement
designated to be the "Credit Agreement" at any one time. Any Indebtedness
Incurred pursuant to the second paragraph of the "Limitation on Additional
Indebtedness" covenant may be Incurred pursuant to the terms of the Credit
Agreement, provided that such Indebtedness so Incurred shall be deemed to have
been Incurred pursuant to the Credit Agreement for all purposes of the
Indenture other than with respect to the "Limitation on Additional
Indebtedness" covenant and clause (3) of the first paragraph of the
"Limitation on Asset Sales and Sales of Subsidiary Stock" covenant.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
against fluctuation in currency values.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means, so long as it is in effect, the
Credit Agreement and, thereafter, any Senior Indebtedness designated by the
Company to be "Designated Senior Indebtedness".
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be
redeemed or repurchased (including at
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the option of the holder thereof) by such Person or any of its Subsidiaries,
in whole or in part, on or prior to the Stated Maturity of the Notes; provided
that Capital Stock will not be deemed to be Disqualified Capital Stock if it
may only be so redeemed or repurchased solely in consideration of Qualified
Capital Stock of the Company or Parent.
"Eligible Investments" means United States Treasury Bills maturing no later
than the Business Day preceding December 31, 1997.
"Excluded Group" means a "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company or Parent
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a
majority of the voting power of the Capital Stock "beneficially owned" (as
such term is used in Rule 13d-3 promulgated under the Exchange Act) by such
group.
"Excluded Person" means members of the Price family who owned Capital Stock
of the Parent on the Issue Date and any Affiliate of any of the foregoing that
is wholly owned by any of the foregoing.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or, if FASB ceases to exist,
any successor thereto; provided, however, that for purposes of determining
compliance with covenants in the Indenture, "GAAP" means such generally
accepted accounting principles as in effect as of the Issue Date.
"Holder" means a Person in whose name a Note is registered. The Holder of a
Note will be treated as the owner of such Note for all purposes.
"Indebtedness" of any Person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of such Person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts, payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due
date or to financial institutions, which obligations are not being contested
in good faith and for which appropriate reserves have been established) those
incurred in the ordinary course of its business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) for the
payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced
by a letter of credit or a reimbursement obligation of such Person with
respect to any letter of credit; (b) all obligations of such Person under
Interest Swap and Hedging Obligations; (c) all liabilities of others of the
kind described in the preceding clauses (a) or (b) that such Person has
guaranteed or that is otherwise its legal liability or which are secured by
any assets or property of such Person and all obligations to purchase, redeem
or acquire any Capital Stock; (d) all Disqualified Capital Stock of such
Person and all Preferred Stock of such Person's Subsidiaries; and (e) any and
all deferrals, renewals, extensions, refinancing and refundings (whether
direct or indirect) of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (a), (b), (c),
or (d) or this clause (e), whether or not between or among the same parties;
provided that the outstanding principal amount at any date of any Indebtedness
issued with original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of such
Indebtedness at such date.
"Interest Swap and Hedging Obligations" means any obligations of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For
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purposes of the Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation
had terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such obligation provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the
net amount so determined, plus any premium due upon default by such Person.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such Person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of such other Person or any agreement to make
any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) or any commitment to make any such advance, loan or extension; (c) the
entering into by such Person of any guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of such other
Person; (d) the making of any capital contribution by such Person to such
other Person; and (e) the designation by the Board of Directors of the Company
of any Person to be an Unrestricted Subsidiary. For purposes of the
"Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided
that, for purposes of this sentence, the fair market value of net assets in
excess of $5,000,000 shall be as determined by an independent appraiser of
national reputation.
"Issue Date" means the time and date of the first issuance of the Notes
under the Indenture.
"Junior Indebtedness" means Indebtedness of the Company that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in all respects.
"Junior Securities" of any Person means securities (including Capital Stock
but excluding Disqualified Capital Stock) issued by such Person to a Holder on
account of the Notes that (i) has a Weighted Average Life and maturity or
mandatory redemption obligation, if any, longer than, or occurring after the
final maturity date of, all Designated Senior Indebtedness of such Person
outstanding on the date of issuance of such Junior Securities, (ii) by their
terms or by law are subordinated to Designated Senior Indebtedness of such
Person outstanding on the date of issuance of such Junior Securities at least
to the same extent as the Notes and (iii) are not secured by any assets or
property of the Company or any of its Subsidiaries. As used herein,
"Designated Senior Indebtedness of such Person outstanding on the date of
issuance of such Junior Securities" shall include securities issued in
connection with a reorganization pursuant to the bankruptcy laws of any
jurisdiction to Persons which held "Designated Senior Indebtedness" in such
reorganization proceeding.
"Lien" means any mortgage, lien, pledge, charge, security interest, or other
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement and any lease deemed to constitute a security interest and any
option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer, Proceeds Purchase Offer or Asset
Sale Offer).
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"Merger" means the merger of the Company with and into Palmer.
"Merger Date" means the time and date of the consummation of the Merger.
"Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents
received by the Company and its Restricted Subsidiaries in respect of an Asset
Sale (including upon the conversion to cash and Cash Equivalents of (A) any
note or installment receivable at any time, or (B) any other property as and
when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent such cash and Cash
Equivalents are received within one year after such Asset Sale), less the sum
of (i) all reasonable out-of-pocket fees, commissions and other expenses
incurred in connection with such Asset Sale, including the amount (estimated
in good faith by the Board of Directors of the Company) of income, franchise,
sales and other applicable taxes required to be paid by the Company or any
Restricted Subsidiary of the Company in connection with such Asset Sale and
(ii) the aggregate amount of cash so received which is used to retire any
existing Senior Indebtedness of the Company or Indebtedness of its Restricted
Subsidiaries, as the case may be, which is required to be repaid in connection
with such Asset Sale or is secured by a Lien on the property or assets of the
Company or any of its Restricted Subsidiaries, as the case may be.
"Net Pops" of any Person with respect to any System means the Pops of the
MSA or RSA served by such System multiplied by the direct and/or indirect
percentage interest of such Person in the entity licensed or designated to
receive an authorization by the Federal Communications Commission to construct
or operate a System in that MSA or RSA.
"Net Proceeds" means the aggregate net proceeds (including the fair market
value of non-cash proceeds constituting equipment or other assets of a type
generally used in a Related Business an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
pursuant to the terms of the documentation governing any Indebtedness.
"Operating Cash Flow" of any Person means (a), with respect to any period,
the Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of
such Person and its consolidated Subsidiaries and (iii) Consolidated Interest
Expense of such Person for such period, determined, in each case, on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, less (c) the amount of all cash payments made during
such period by such Person and its Subsidiaries to the extent such payments
relate to non-cash charges that were added back in determining Operating Cash
Flow for such period or for any prior period. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries,
references to a Person and its Subsidiaries in the foregoing definition shall
be deemed to refer to the Company and its Restricted Subsidiaries.
"Parent" shall mean PCC or any directly or indirectly wholly owned
subsidiary of PCC that directly or indirectly wholly owns the Company.
"Permitted Acquisition Indebtedness" means, with respect to any Person,
Indebtedness Incurred in connection with the acquisition of property,
businesses or assets which, or Capital Stock of a Person all or substantially
all of whose assets, are of a type generally used in a Related Business;
provided that, in the case of the Company or its Restricted Subsidiaries, as
applicable, (x) (i) the Company's Annualized Operating Cash
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Flow Ratio, after giving effect to such acquisition and such Incurrence on a
pro forma basis, is no greater than such ratio prior to giving pro forma
effect to such acquisition and such Incurrence, (ii) the Company's
consolidated Senior Indebtedness, divided by the Net Pops of the Company and
its Restricted Subsidiaries, in each case giving pro forma effect to the
acquisition and such Incurrence, does not exceed $120, (iii) the Company's
consolidated Indebtedness divided by the Net Pops of the Company and its
Restricted Subsidiaries does not exceed $160 as a result of the acquisition
and such Incurrence and (iv) after giving effect to such acquisition and such
Incurrence the acquired property, businesses or assets or such Capital Stock
is owned directly by the Company or a Wholly Owned Restricted Subsidiary of
the Company or (y) (i) under the terms of such Indebtedness and pursuant to
applicable law, no recourse could be had for the payment of principal,
interest or premium with respect to such Indebtedness or for any claim based
thereon against the Company or any Person that constituted a Restricted
Subsidiary immediately prior to the consummation of such acquisition or any of
their property or assets, (ii) the obligor of such Indebtedness shall have,
immediately after giving effect to such acquisition and such Incurrence on a
pro forma basis, a ratio of Annualized Operating Cash Flow as of the date of
the acquisition to the product of Consolidated Interest Expense for the
Reference Period multiplied by four (but excluding from Consolidated Interest
Expense all amounts that are not required to be paid in cash on a current
basis) of at least 1 to 1 and (iii) immediately subsequent to the Incurrence
of such Indebtedness, the obligor thereof shall be a Restricted Subsidiary and
shall have been designated by the Company (as evidenced by an Officers'
Certificate delivered promptly to the Trustee) to be a "Non-Recourse
Restricted Subsidiary."
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary (other than a Non-
Recourse Restricted Subsidiary); (iii) Investments in a Person substantially
all of whose assets are of a type generally used in a Related Business (an
"Acquired Person") if, as a result of such Investments, (A) the Acquired
Person immediately thereupon becomes a Restricted Subsidiary (other than a
Non-Recourse Restricted Subsidiary) or (B) the Acquired Person immediately
thereupon either (1) is merged or consolidated with or into the Company or any
of its Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary) and the surviving Person is the Company or a Restricted Subsidiary
(other than a Non-Recourse Restricted Subsidiary) or (2) transfers or conveys
all or substantially all of its assets to, or is liquidated into, the Company
or any of its Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary); (iv) Investments in accounts and notes receivable acquired in the
ordinary course of business; (v) any securities received in connection with an
Asset Sale (other than those of a Non-Recourse Restricted Subsidiary) and any
investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of
a Person, all or substantially all of whose assets are of a type used in a
Related Business, that complies with the "Limitation on Asset Sales and Sales
of Subsidiary Stock" covenant; (vi) any guarantee issued by a Restricted
Subsidiary in respect of Senior Indebtedness Incurred in compliance with the
Indenture; (vii) advances and prepayments for asset purchases in the ordinary
course of business in a Related Business of the Company or a Restricted
Subsidiary; (viii) Investments in Non-Recourse Restricted Subsidiaries with
the proceeds of contributions irrevocably and unconditionally received without
restriction by the Company from Parent; and (ix) customary loans or advances
made in the ordinary course of business to officers, directors or employees of
the Company or any of its Restricted Subsidiaries for travel, entertainment,
and moving and other relocation expenses.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges
not yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 30 days, and (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects which, singly or
in the aggregate,
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do not in any case materially detract from the value of the property, subject
thereto (as such property is used by the Company or any of its Restricted
Subsidiaries) or interfere with the ordinary conduct of the business of the
Company or any of its Restricted Subsidiaries; (f) Liens arising by operation
of law in connection with judgments, only to the extent, for an amount and for
a period not resulting in an Event of Default with respect thereto; (g)
pledges or deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance and other types of social
security legislation; (h) Liens in favor of the Trustee arising under the
Indenture; (i) Liens securing Permitted Acquisition Indebtedness, which either
(A) were not incurred or issued in anticipation of such acquisition or (B)
secure Permitted Acquisition Indebtedness meeting the requirements set forth
in clause (y) of the definition thereof; (j) Liens securing Senior
Indebtedness that was incurred in accordance with the "Limitation on
Incurrence of Additional Indebtedness" covenant; (k) Liens securing
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary or is merged with or into the Company or a Restricted Subsidiary,
provided that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets; (l) Liens arising from
Purchase Money Indebtedness permitted under the Indenture; (m) Liens securing
Refinancing Indebtedness Incurred to refinance any Indebtedness that was
previously so secured in a manner no more adverse to the Holders of the Notes
than the terms of the Liens securing such refinanced Indebtedness; and (n)
Liens in favor of the Company or a Wholly Owned Restricted Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality
or other entity.
"Pops" means the estimate of the population of a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA") as derived from the most recent
Donnelly Market Service or if such statistics are no longer printed in the
Donnelly Market Service or the Donnelly Market Service is no longer published,
the most recent Rand McNally Commercial Atlas or if such statistics are no
longer printed in the Rand McNally Commercial Atlas or the Rand McNally
Commercial Atlas is no longer published, such other nationally recognized
source of such information.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property
or assets for the business of the Company or its Restricted Subsidiaries,
provided that the recourse of the lenders with respect to such Indebtedness is
limited solely to the property or assets so purchased without further recourse
to either the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Reference Period" with regard to any Person means the last full fiscal
quarter of such Person for which financial information (which the Company
shall use its best efforts to compile in a timely manner) in respect thereof
is available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference (or if such
Indebtedness or Disqualified Capital Stock does not require cash payments
prior to maturity or is otherwise issued at a discount, the original issue
price of such Indebtedness or Disqualified Capital Stock), not to exceed the
sum of (x) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such
Refinancing, (y) the amount of any premium required
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to be paid in connection with such refinancing pursuant to the terms of such
Indebtedness and (z) all other customary fees and expenses of the Company or
such Restricted Subsidiary reasonably incurred in connection with such
refinancing; provided, that (A) Refinancing Indebtedness issued by any
Restricted Subsidiary of the Company shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such Restricted
Subsidiary, (B) Refinancing Indebtedness shall (x) not have a Weighted Average
Life shorter than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and (y) in all respects, be no less
subordinated or junior, if applicable, to the rights of Holders of the Notes
than was the Indebtedness or Disqualified Capital Stock to be refinanced and
(C) such Refinancing Indebtedness shall have no installments of principal (or
redemption payment) scheduled to come due earlier than the scheduled maturity
of any installment of principal (or redemption payment) of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity of the Notes.
"Related Business" means any business directly related to the ownership,
development, operation, and acquisition of wireless cellular communications
systems.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any
trust in which any Person described in clause (i) above, has a beneficial
interest.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of such Person, its Parent, or
any Subsidiary of such Person, (ii) any payment on account of the purchase,
redemption or other acquisition or retirement for value, or any payment in
respect of any amendment (in anticipation of or in connection with any such
retirement, acquisition or defeasance) in whole or in part, of any shares of
Capital Stock of such Person, its Parent, or any Subsidiary of such Person
held by Persons other than such Person or any of its Restricted Subsidiaries,
(iii) any defeasance, redemption, repurchase or other acquisition or
retirement for value, or any payment in respect of any amendment (in
anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any Indebtedness of the Company (other
than the scheduled repayment thereof at maturity and any mandatory redemption
or mandatory repurchase thereof pursuant to the terms thereof) by such Person
or a Subsidiary of such Person that is subordinate in right of payment to, or
ranks pari passu (other than the Notes) with, the Notes (other than in
exchange for Refinancing Indebtedness permitted to be Incurred under the
Indenture and except for any such defeasance, redemption, repurchase, other
acquisition or payment in respect of Indebtedness held by any Restricted
Subsidiary) and (iv) any Investment (other than a Permitted Investment);
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on shares of Capital Stock of the
Company or any Restricted Subsidiary solely in shares of Qualified Capital
Stock, (ii) any dividend, distribution or other payment to the Company, or any
dividend to any of its Restricted Subsidiaries, by any of its Subsidiaries,
(iii) the purchase, redemption or other acquisition or retirement for value of
shares of Capital Stock of any Restricted Subsidiary (other than Non-Recourse
Restricted Subsidiaries) held by Persons other than the Company or any of its
Restricted Subsidiaries, (iv) payments to satisfy obligations to pay statutory
appraisal rights resulting from the Merger and any settlement in respect
thereof to security holders of Palmer, (v) fees and expenses incurred in
connection with the Merger, and (vi) cash payment in respect of purchases of
options and rights for shares of Palmer common stock issued pursuant to
Palmer's 1995 Stock Option Plan, 1995 Directors' Stock Option Plan, 1995
Employee Stock Purchase Plan and 1995 Non-Employee Director Stock Purchase
Plan.
"Restricted Subsidiary" means any Subsidiary of the Company which at the
time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of the "Limitation on Incurrence of Additional
Indebtedness" covenant, on a pro forma basis taking into account such
designation.
"Senior Indebtedness" means all Indebtedness of the Company (including, with
respect to the Credit Agreement, all Obligations), including interest thereon,
whether outstanding on the Issue Date or thereafter
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issued, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include (a) Indebtedness that is
expressly subordinated or junior in right of payment to any Indebtedness of
the Company, (b) Indebtedness represented by Disqualified Capital Stock, (c)
any liability for Federal, state, local or other taxes owed or owing by the
Company, (d) Indebtedness of the Company to any Subsidiary of the Company or
any Affiliate of the Company (other than Purchase Money Indebtedness
constituting at least 75% but not more than 100% of the cost of wireless
cellular communication system equipment and other related fixed assets,
Incurred in compliance with the "Limitation on Incurrence of Additional
Indebtedness" covenant), (e) trade payables and (f) Indebtedness to the extent
incurred in violation of the Indenture.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of
the net book value of the assets of the Company and its Restricted
Subsidiaries on a consolidated basis.
"Stated Maturity" means the date fixed for the payment of any principal or
premium pursuant to the Indenture and the Notes, including the Maturity Date,
upon redemption, acceleration, Asset Sale Offer, Proceeds Purchase Offer,
Change of Control Offer or otherwise.
"Subsidiary" with respect to any Person, means (i) a corporation at least
fifty percent of whose Capital Stock with voting power, under ordinary
circumstances to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, or (ii) a partnership in which
such Person or a Subsidiary of such Person is, at the time, a general partner
of such partnership, or (iii) any Person in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
(x) at least a fifty percent ownership interest or (y) the power to elect or
direct the election of the directors or other governing body of such Person.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company that, at
the time of determination, shall be an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below). The Board of
Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the
time it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no
Default or Event of Default is existing or will occur as a consequence
thereof, (b) such Subsidiary does not own any Capital Stock of, or own or hold
any Lien on any property or asset of, the Company or any Restricted Subsidiary
that is not a Subsidiary of the Subsidiary to be so designated and (c) such
Subsidiary and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee, or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any property or assets of the Company or
any of its Restricted Subsidiaries (except that such Subsidiary and its
Subsidiaries may guarantee the Notes); provided that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Voting Stock" means Capital Stock of the Company having generally the right
to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters
of the Company.
"Weighted Average Life" means, as of the date of determination, with respect
to any debt instrument, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
93
<PAGE>
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i) a
Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more
other Wholly Owned Subsidiaries of such Person, or (ii) any entity other than
a corporation in which such Person, directly or indirectly, owns not less than
99% of the Capital Stock of such entity.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. Holders of Old Notes are entitled to certain
registration rights pursuant to the Registration Rights Agreement. Pursuant to
the Registration Rights Agreement, the Company has agreed to file with the SEC
and have declared effective on or prior to December 7, 1997 a registration
statement (the "Exchange Offer Registration Statement") under the Securities
Act with respect with the Exchange Offer. The Company also agreed that, after
the effectiveness of the Exchange Offer Registration Statement, it would,
subject to certain conditions, offer to the Holders of Old Notes who are able
to make certain representations the opportunity to exchange their Old Notes
for New Notes. In the event that applicable interpretations of the staff of
the SEC do not permit the Company to effect the Exchange Offer ("SEC
Blockage") or do not permit any Holder of Old Notes, subject to certain
limitations, to participate in such Exchange Offer, the Company has agreed to
file with the SEC a shelf registration statement (the "Shelf Registration
Statement") to cover resales of the applicable Old Notes. The Registration
Statement of which this Prospectus is a part constitutes the Exchange Offer
Registration Statement.
The Registration Rights Agreement provides that (i) the Company will use its
reasonable best efforts to have the Exchange Offer Registration Statement
(and, if applicable, a Shelf Registration Statement) declared effective by the
SEC on or prior to December 7, 1997. If the Exchange Offer has not been
consummated by January 6, 1998 (unless there exists a SEC Blockage) (such
event, a "Registration Default"), the Company will pay liquidated damages to
each Holder of Old Notes, during the first 90-day period immediately following
the occurrence of such Registration Default in an amount equal to $0.05 per
week per $1,000 principal amount of Notes constituting Old Notes held by such
Holder. The amount of the liquidated damages will increase by an additional
$0.05 per week per $1,000 principal amount constituting Old Notes for each
subsequent 90-day period until the Exchange Offer is consummated, up to a
maximum amount of liquidated damages of $0.25 per week per $1,000 principal
amount of Notes constituting Old Notes. All accrued liquidated damages shall
be paid to Holders in the same manner as interest payments on the Notes on
semi-annual Damages Payment Dates which correspond to interest payment dates
for the Notes.
The Registration Rights Agreement provides that the Company (i) shall make
available for a period of 90 days after the consummation of the Exchange Offer
a prospectus meeting the requirements of the Securities Act to any broker-
dealer for use in connection with any resale of any such New Notes and (ii)
shall pay all expenses incident to the Exchange Offer (including the expenses
of one counsel to the Holders of the Notes) and will indemnify certain Holders
of the Notes (including any broker-dealer) against certain liabilities,
including liabilities under the Securities Act.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding sentence. In addition, for so
long as the Notes are outstanding, the Company will continue to provide to
Holders of Notes and to prospective purchasers of the Notes the information
required by Rule 144A(d)(4). The Company will provide a copy of the
Registration Rights Agreement to prospective investors upon request.
94
<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following summary describes the principal United States federal income
tax consequences of the ownership and disposition of the Notes by Holders who
acquired such securities in the Offering (the "Initial Holders"). This summary
is based on the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), administrative pronouncements, judicial decisions and existing
and proposed Treasury Regulations, changes to any of which subsequent to the
date of this Prospectus may affect the tax consequences described herein. This
summary discusses only Notes held as capital assets within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a Holder in light of his particular circumstances or to
Holders subject to special rules, such as persons who are not U.S. Holders (as
defined below) or Initial Holders, certain financial institutions, insurance
companies, dealers in securities and Holders who hold the Notes as part of a
straddle or a hedging or conversion transaction. Holders of Notes should
consult their tax advisors with regard to the application of the United States
federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that, for United States federal income tax purposes, is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
The term also includes certain former citizens or residents of the United
States.
PAYMENTS OF INTEREST
Interest paid on a Note will generally be taxable as ordinary income at the
time it accrues or is received in accordance with the U.S. Holder's method of
accounting for federal income tax purposes.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not result in any federal income tax consequences to U.S. Holders. When a U.S.
Holder exchanges an Old Note for a New Note pursuant to the Exchange Offer,
the U.S. Holder will have the same adjusted basis and holding period in the
New Note as in the Old Note immediately before the exchange.
REDEMPTION
A U.S. Holder will recognize a capital gain upon a Special Redemption or an
Optional Redemption equal to the excess, if any, of the redemption price over
the principal amount of a Note.
MERGER OF THE COMPANY INTO PALMER
Although there is no authority with respect to a transaction closely
comparable to the issuance of the Notes in anticipation of a merger of the
obligor into an unrelated entity pursuant to an acquisition agreement between
the obligor's indirect parent and such entity, the Company believes that upon
the Merger an Initial Holder (i) will not recognize gain or loss, and (ii)
will have a tax basis equal to the principal amount of the Notes and a holding
period that commences on the date of the Merger.
U.S. Holders who are not Initial Holders are urged to consult their tax
advisors with respect to the consequences, if any, of the Merger.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of
95
<PAGE>
market-making activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any such broker-dealer
for use in connection with any such resale. The Company will not receive any
proceeds from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the New
Notes or a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such New Notes. Any broker-dealer that resells New Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker-dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each broker-dealer reselling New Notes pursuant to this Prospectus, and their
officers, directors and controlling persons, against certain liabilities in
connection with the offer and sale of the New Notes, including liabilities
under the Securities Act, or to contribute to payments that such broker-
dealers may be required to make in respect thereof.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Company by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated balance sheets of Palmer Wireless, Inc. and subsidiaries as
of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three years ended December 31, 1996 appearing in this Prospectus and
Registration Statement have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
AVAILABLE INFORMATION
This Prospectus constitutes a part of the Registration Statement on Form S-4
under the Securities Act filed by the Company with the SEC under the
Securities Act. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the Notes
offered hereby. Statements contained herein concerning the provisions of any
documents filed as an exhibit to the Registration Statement or otherwise filed
with the SEC are not necessarily complete, and in each instance reference is
made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
96
<PAGE>
CERTAIN TERMS
Interests in cellular markets that are licensed by the FCC are commonly
measured on the basis of the population of the market served, with each person
in the market area referred to as a "Pop." The number of Pops or Net Pops
owned is not necessarily indicative of the number of subscribers or potential
subscribers. As used in this Prospectus, unless otherwise indicated, the term
"Pops" means the estimate of the 1996 population of an MSA or RSA, as derived
from the 1996 Donnelley Market Information Service. The term "Net Pops" means
the estimated population with respect to a given service area multiplied by
the percentage interest that the Company owns in the entity licensed in such
service area. MSAs and RSAs are also referred to as "markets." The term
"wireline" license refers to the license for any market initially awarded to a
company or group that was affiliated with a local landline telephone carrier
in the market, and the term "non-wireline" license refers to the license for
any market that was initially awarded to a company, individual or group not
affiliated with any landline carrier. The term "System" means an FCC-licensed
cellular telephone system. The term "CTIA" means the Cellular
Telecommunications Industry Association.
97
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PALMER WIRELESS, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets, December 31, 1995 and 1996 ................ F-3
Consolidated Statements of Operations, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-4
Consolidated Statements of Stockholders' Equity, Years Ended December
31, 1994, 1995 and 1996 ............................................... F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-6
Notes to Consolidated Financial Statements ............................. F-8
Condensed Consolidated Balance Sheets, December 31, 1996 and June 30,
1997 (Unaudited) ...................................................... F-21
Condensed Consolidated Statements of Operations, Six Months Ended June
30, 1996 and 1997 (Unaudited) ......................................... F-22
Condensed Consolidated Statements of Stockholders' Equity, Year Ended
December 31, 1996 and Six Months Ended June 30, 1997 (Unaudited) ...... F-23
Condensed Consolidated Statements of Cash Flows, Six Months Ended June
30, 1996 and 1997 (Unaudited) ......................................... F-24
Notes to Condensed Consolidated Financial Statements (Unaudited) ....... F-25
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Palmer Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of Palmer
Wireless, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Palmer
Wireless, Inc. and subsidiaries at December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
January 30, 1997,
except for Note 10 which is as of
February 1, 1997
F-2
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS (NOTE 4)
Current assets:
Cash and cash equivalents....................... $ 3,436 $ 1,698
Trade accounts receivable, net of allowance for
doubtful accounts of $1,880 in 1995 and $1,791
in 1996........................................ 17,347 18,784
Receivable from other cellular carriers......... 3,936 1,706
Prepaid expenses and deposits................... 1,111 2,313
Inventory....................................... 2,434 5,106
Deferred income taxes (note 5).................. 821 830
-------------- --------------
Total current assets.......................... $ 29,085 $ 30,437
-------------- --------------
Property, plant and equipment:
Land and improvements........................... 3,796 5,238
Buildings and improvements...................... 5,120 7,685
Equipment, communication systems, and
furnishings.................................... 127,140 166,735
-------------- --------------
$ 136,056 $ 179,658
Less accumulated depreciation and amortization.. 35,120 47,220
-------------- --------------
Net property, plant and equipment............... $ 100,936 $ 132,438
-------------- --------------
Licenses and goodwill, at cost less accumulated
amortization of $20,828 in 1995 and $30,188 in
1996 (note 3)................................... 321,053 375,808
Other intangible assets and other assets, at cost
less accumulated amortization of $4,471 in 1995
and $7,311 in 1996.............................. 11,797 11,259
-------------- --------------
Total assets.................................. $ 462,871 $ 549,942
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
4)............................................. $ 7,441 $ 5,296
Notes payable (note 4).......................... -- 1,366
Accounts payable................................ 10,795 10,394
Accrued interest payable........................ 2,508 2,341
Accrued salaries and employee benefits.......... 2,267 2,432
Other accrued liabilities....................... 4,058 3,626
Deferred revenue................................ 2,860 3,929
Customer deposits............................... 591 757
-------------- --------------
Total current liabilities..................... $ 30,520 $ 30,141
Long-term debt, excluding current installments
(note 4)........................................ 343,000 337,000
Deferred income taxes (note 5)................... 9,636 11,500
Minority interests............................... 5,162 6,371
-------------- --------------
Total liabilities............................. $ 388,318 $ 385,012
-------------- --------------
Stockholders' equity (note 7):
Preferred stock par value $.01 per share;
10,000,000 shares authorized; none issued...... -- --
Class A Common Stock par value $.01 per share;
73,000,000 shares authorized; 6,095,772 shares
issued in 1995 and 11,119,681 shares issued in
1996 including shares in treasury and Class B
Common Stock par value $.01 per share;
18,000,000 shares authorized; 17,293,578
shares issued in 1995 and 1996................. 234 284
Additional paid-in capital...................... 72,466 166,975
Retained earnings............................... 1,853 6,535
-------------- --------------
$ 74,553 $ 173,794
Less Class A Common Stock in treasury at cost --
600,000 shares in 1996.......................... -- 8,864
-------------- --------------
Total stockholders' equity.................... $ 74,553 $ 164,930
Commitments and contingencies (note 8).
-------------- --------------
Total liabilities and stockholders' equity.... $ 462,871 $ 549,942
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue:
Service............... $ 61,021 $ 96,686 $ 151,119
Equipment sales and
installation......... 7,958 8,220 8,624
------------------ ------------------ ------------------
Total revenue..... $ 68,979 $ 104,906 $ 159,743
------------------ ------------------ ------------------
Operating expenses:
Engineering,
technical, and other
direct............... 12,776 18,184 28,717
Cost of equipment..... 11,546 14,146 17,944
Selling, general, and
administrative:
Related party, net
(note 6)........... (442) (408) (414)
Other............... 20,199 31,398 47,306
Depreciation and
amortization......... 9,817 15,004 25,013
------------------ ------------------ ------------------
Total operating
expenses......... $ 53,896 $ 78,324 $ 118,566
------------------ ------------------ ------------------
Operating income........ $ 15,083 $ 26,582 $ 41,177
------------------ ------------------ ------------------
Other income (expense):
Interest income:
Investment.......... 93 211 62
Related party (note
6)................. 78 -- --
Interest expense:
Long-term debt...... (11,158) (21,424) (31,524)
Related party (note
6)................. (1,728) -- --
------------------ ------------------ ------------------
Interest expense,
net................ $ (12,715) $ (21,213) $ (31,462)
Other expense, net.... (70) (687) (429)
------------------ ------------------ ------------------
Total other
expense.......... $ (12,785) $ (21,900) $ (31,891)
------------------ ------------------ ------------------
Income before minority
interest share of
income and income tax
expense................ $ 2,298 $ 4,682 $ 9,286
Minority interest share
of income.............. 636 1,078 1,880
------------------ ------------------ ------------------
Income before income tax
expense................ $ 1,662 $ 3,604 $ 7,406
Income tax expense (note
5)..................... -- 2,650 2,724
------------------ ------------------ ------------------
Net income.............. $ 1,662 $ 954 $ 4,682
================== ================== ==================
Net income per share of
common stock........... $ 0.09 $ 0.04 $ 0.18
================== ================== ==================
Average shares
outstanding............ 18,000,000 22,326,613 26,132,455
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK (ACCUMULATED
CLASS A CLASS B ADDITIONAL DEFICIT) TREASURY STOCK TOTAL
------------------ ----------------- PAID-IN RETAINED --------------- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
----------- ------ ---------- ------ ---------- ------------ ------- ------- -------------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993................... 706,422 $ 7 17,293,578 $173 $ 3,064 $ -- -- $ -- $ 3,244
Partnership earnings
before business
combination............ -- -- -- -- 1,829 -- -- -- 1,829
Net loss................ -- -- -- -- -- (167) -- -- (167)
Capital contribution,
net before business
combination............ -- -- -- -- 9 -- -- -- 9
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1994................... 706,422 $ 7 17,293,578 $173 $ 4,902 $ (167) -- $ -- $ 4,915
Partnership loss before
business combination... -- -- -- -- (1,066) -- -- -- (1,066)
Public offering, net of
issuance costs of
$8,114................. 5,369,350 54 -- -- 68,345 -- -- -- 68,399
Exercise of stock
options................ 20,000 -- -- -- 285 -- -- -- 285
Net income.............. -- -- -- -- -- 2,020 -- -- 2,020
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1995................... 6,095,772 $ 61 17,293,578 $173 $ 72,466 $1,853 -- $ -- $ 74,553
Public offering, net of
issuance costs of
$5,826................. 5,000,000 50 -- -- 94,124 -- -- -- 94,174
Exercise of stock
options................ 6,666 -- -- -- 95 -- -- -- 95
Employee and non-
employee director stock
purchase plans......... 17,243 -- -- -- 290 -- -- -- 290
Treasury shares
purchased.............. -- -- -- -- -- -- 600,000 (8,864) (8,864)
Net income.............. -- -- -- -- -- 4,682 -- -- 4,682
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1996................... 11,119,681 $111 17,293,578 $173 $166,975 $6,535 600,000 $(8,864) $164,930
=========== ==== ========== ==== ======== ====== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
(DOLLAR AMOUNTS IN THOUSANDS)
Cash flows from operating activities:
Net income.................................... $ 1,662 $ 954 $ 4,682
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 9,817 15,004 25,013
Minority interest share of income............ 636 1,078 1,880
Deferred income taxes........................ -- 2,650 1,855
Increase in trade accounts receivable........ (4,195) (2,741) (1,561)
(Increase) decrease in inventory............. (3,672) 4,076 (2,595)
Increase (decrease) in accounts payable...... 2,508 2,623 (841)
Increase (decrease) in accrued interest
payable...................................... 1,184 (14) (167)
Interest deferred and added to related party
borrowings................................... 1,611 -- --
Deferred interest paid to related party...... (6,475) -- --
Interest deferred and added to other debt.... 537 607 355
Payment of deferred interest................. -- -- (1,080)
Increase in accrued salaries and employee
benefits..................................... 466 241 165
Increase (decrease) in other accrued
liabilities.................................. 895 583 (507)
Increase in deferred revenue................. 1,163 658 912
Increase (decrease) in customer deposits..... 191 (53) 134
Change in other accounts..................... 910 1,994 1,885
--------- --------- ---------
Total adjustments.......................... $ 5,576 $ 26,706 $ 25,448
--------- --------- ---------
Net cash provided by operating activities.. $ 7,238 $ 27,660 $ 30,130
--------- --------- ---------
Cash flows from investing activities:
Cash payment for purchases of non-wireline
cellular telephone systems and licenses
(note 3)..................................... (91,720) (158,397) (67,588)
Purchases of minority interests.............. (3,097) (1,543) (1,854)
Capital expenditures......................... (22,541) (36,564) (41,445)
Proceeds from sales of property, plant and
equipment.................................... 150 38 5
Decrease (increase) in other intangible
assets and other assets...................... 358 (310) (2,180)
Collection of purchase price adjustment...... -- -- 2,452
--------- --------- ---------
Net cash used in investing activities...... $(116,850) $(196,776) $(110,610)
--------- --------- ---------
Cash flows from financing activities:
Advances from Palmer Communications
Incorporated................................. 4,176 -- --
Payments on advances from Palmer
Communications Incorporated................. (2,359) (1,650) --
Increase in notes payable.................... -- -- 1,366
Proceeds from long-term debt................. 137,000 171,000 100,000
Repayment of long-term debt.................. (75) (65,125) (108,319)
Repayment of related party borrowings........ (20,000) -- --
Payment of debt issuance costs............... (6,454) (4,803) --
Public offering proceeds, net................ -- 71,144 95,000
Proceeds from stock options exercised........ -- 285 95
Payment of deferred offering costs........... (1,448) (1,297) (826)
Collection of common stock subscriptions
receivable................................... 100 -- --
Purchase of treasury stock................... -- -- (8,864)
Proceeds from sales under stock purchase
plans........................................ -- -- 290
--------- --------- ---------
Net cash provided by financing activities.. $ 110,940 $ 169,554 $ 78,742
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................ $ 1,328 $ 438 $ (1,738)
Cash and cash equivalents at beginning of
year.......................................... 1,670 2,998 3,436
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 2,998 $ 3,436 $ 1,698
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During 1994, certain assets net of certain liabilities were transferred
between Palmer Wireless, Inc. and Palmer Communications Incorporated. These
transfers were treated as contributions to and distributions from equity and
amounted to a net contribution of $9 for the year ended December 31, 1994.
During 1994, Palmer Wireless, Inc. accrued $188 for unpaid deferred offering
costs.
During 1995, Palmer Wireless, Inc. committed to purchase certain minority
interests in 1996. This commitment totaling $451 was accrued in 1995 and paid
in 1996.
During 1996, the Company increased the purchase obligations related to the
final purchase price adjustment for the controlling interest in a non-wireline
cellular telephone system purchased in 1991. This increase amounted to $899
and resulted in an increase in licenses.
Acquisitions of non-wireline cellular telephone systems in 1994, 1995 and
1996 (note 3):
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Cash payment...................................... $91,720 $158,397 $67,588
======= ======== =======
Allocated to:
Fixed assets.................................... $11,332 $ 22,846 $ 5,678
Licenses........................................ 79,383 136,940 61,433
Deferred income taxes........................... -- (6,165) --
Current assets and liabilities, net............. 1,005 4,776 477
------- -------- -------
$91,720 $158,397 $67,588
======= ======== =======
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1994 1995 1996
<S> <C> <C> <C>
Cash paid for interest.............................. $15,199 $18,435 $29,733
Cash paid for income taxes.......................... -- -- $ 1,591
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Palmer
Wireless, Inc. and its subsidiaries (the "Company"), all of which the Company
has an ownership interest in greater than 50 percent.
Palmer Wireless, Inc. ("Wireless") is a Delaware corporation and was
incorporated on December 15, 1993 to effect an initial public offering of its
Class A Common Stock. At December 31, 1996, Palmer Communications Incorporated
("PCI") owned 61 percent of Wireless' outstanding common stock and had 75
percent of Wireless' voting rights and therefore Wireless is a subsidiary of
PCI.
In March of 1995, Wireless issued common stock for 100 percent of the
partnership interests of Palmer Cellular Partnership (the "Partnership") (see
note 2). Since this exchange was between related parties it has been accounted
for in a manner similar to a pooling of interests. Therefore, the statements
of operations, stockholders' equity and cash flows for the year ended December
31, 1994 have been restated to include the accounts of the Partnership.
Losses in subsidiaries, attributable to minority stockholders and partners,
in excess of their capital accounts and cash capital call provisions are not
eliminated in consolidation.
Significant intercompany accounts and transactions have been eliminated in
the consolidation.
OPERATIONS
The Company has majority ownership in corporations and partnerships which
operate the non-wireline cellular telephone systems in nine Metropolitan
Statistical Areas ("MSA") in three states: Florida (two), Georgia (five) and
Alabama (two). The Company's ownership percentages in these entities range
from approximately 78 percent to 100 percent. The Company owns directly and
operates eight non-wireline cellular telephone systems in Rural Service Areas
("RSA") in Georgia (seven) and Alabama (one).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows the Company considers
repurchase agreements with a maturity of three months or less to be cash
equivalents.
TRADE ACCOUNTS RECEIVABLE
The Company grants credit to its customers. Substantially all of the
customers are residents of the local areas served by the Company. Generally,
the Company discontinues service to customers whose accounts are 60 days past
due. The activity in the Company's allowance for doubtful accounts for the
years ended December 31, 1994, 1995, and 1996 consisted of the following:
<TABLE>
<CAPTION>
ADDITIONS--
BALANCE AT ADDITIONS ALLOWANCE AT BALANCE
BEGINNING CHARGED TO DATES OF DEDUCTIONS NET AT END
OF YEAR EXPENSES ACQUISITIONS OF RECOVERIES OF YEAR
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1994................... $ 681 $1,453 $ 211 $ 778 $1,567
====== ====== ====== ====== ======
Year ended December 31,
1995................... $1,567 $2,078 $ 432 $2,197 $1,880
====== ====== ====== ====== ======
Year ended December 31,
1996................... $1,880 $3,946 $1,270 $5,305 $1,791
====== ====== ====== ====== ======
</TABLE>
F-8
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INVENTORY
Inventory consisting primarily of cellular telephones and telephone parts is
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives,
ranging from 5 to 20 years for buildings and improvements and 5 to 10 years
for equipment, communications systems and furnishings.
ACQUISITIONS AND LICENSES
The cost of acquired companies is allocated first to the identifiable
assets, including licenses, based on the fair market value of such assets at
the date of acquisition (as determined by independent appraisers or management
of the Company). The excess of the total consideration over the amounts
assigned to identifiable assets is recorded as goodwill.
Also included in licenses are expenditures related directly to acquiring
licenses which were not developed or operating at the time of purchase.
Licenses and goodwill are being amortized from the date of commencement of
service to customers (with applicable interest capitalized from acquisition
date to this date) on a straight-line basis over a 40-year period.
Subsequent to the acquisition of the licenses, the Company continually
evaluates whether later events and circumstances have occurred that indicate
the remaining estimated useful life of licenses may warrant revision or that
the remaining balance of the license rights may not be recoverable. The
Company has undergone an annual independent appraisal of its licenses' value.
The Company utilizes projected undiscounted cash flows over the remaining life
of the licenses and sales of comparable businesses to evaluate the recorded
value of licenses. The assessment of the recoverability of the remaining
balance of the license rights will be impacted if projected cash flows are not
achieved.
OTHER INTANGIBLE ASSETS AND OTHER ASSETS
Other intangibles and other assets consist primarily of deferred financing
costs, covenants not to compete, subscriber base, and other items. These costs
are being amortized by the interest or straight-line method over their
respective useful lives, which range from 5 to 10 years.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method
of accounting for deferred income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The 1994 consolidated financial statements made no provision for income
taxes, due to the fact that the losses of the Partnership were included in the
income tax returns of the individual partners. Also, the consolidated
financial statements made no provision for income taxes of subsidiary
corporations of the Company since those
F-9
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
corporations had approximately $16,182 of net operating loss carryforwards at
December 31, 1994 for federal income tax purposes. In addition, the 1994
consolidated financial statements made no provision for income taxes on the
loss of Wireless due to the non-utilization of Wireless' net operating loss
for the year.
INTEREST RATE SWAP AND CAP AGREEMENTS
The differential to be paid or received in connection with interest rate
swap agreements is accrued as interest rates change and is recognized over the
life of the agreements.
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the term of the caps. Unamortized premiums are included
in other assets in the consolidated balance sheet. Amounts receivable under
cap agreements are accrued as a reduction of interest expense.
REVENUE RECOGNITION
Service revenue includes local subscriber revenue and roamer revenue.
The Company earns local subscriber revenue by providing access to the
cellular network (access revenue) or, as applicable, for usage of the cellular
network (airtime revenue). Access revenue is billed one month in advance and
is recognized when earned. Airtime revenue is recognized when the service is
rendered.
Roamer revenue represents revenue earned by the Company for usage of its
cellular network by subscribers of other cellular carriers. Roamer revenue is
recognized when the services are rendered.
Equipment sales and installation revenue is recognized upon delivery or
installation of the equipment to the customer.
OPERATING EXPENSES--ENGINEERING, TECHNICAL AND OTHER DIRECT
Engineering, technical and other direct operating expenses represent certain
costs of providing cellular telephone service to customers. These costs
include cost of incollect roaming service. Incollect roaming is the result of
the Company's subscribers using cellular networks of other cellular carriers.
Incollect roaming revenue is netted against the cost of incollect roaming
service to determine net incollect roaming expense.
STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No.123
had been applied. The Company has elected to continue to apply the provisions
of APB Opinion No.25 and provide the pro forma disclosure provisions of SFAS
No. 123.
F-10
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods and assumptions used to estimate the fair
value of the Company's financial instruments are set forth below:
For cash and cash equivalents, trade accounts receivable, receivable from
other cellular carriers, notes payable, accounts payable and accrued expenses,
the carrying amount approximates the estimated fair value due to the short-
term nature of those instruments.
Rates currently available to the Company for long-term debt with similar
terms and remaining maturities are used to discount the future cash flows to
estimate the fair value for long-term debt. Note 4 presents the fair value for
long-term debt and the related interest rate cap and swap agreements.
Fair value estimates are made as of a specific point in time, based upon the
relevant market information about the financial instruments. Because no market
exists for a majority of the Company's financial instruments, fair value
estimates are based on judgements regarding current economic conditions and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of judgement and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
COMPUTATION OF NET INCOME PER SHARE
The computation of net income per share is based on the weighted average
number of common and dilutive common equivalent shares (common stock options
using the treasury stock method) outstanding during the periods presented.
Average shares of common stock outstanding has been computed assuming that the
704,755 shares of Class A Common Stock and 17,288,578 shares of Class B Common
Stock issued in the Exchange (as defined in note 2) have been outstanding
since January 1, 1994 and the 1,667 shares of Class A Common Stock and the
5,000 shares of Class B Common Stock issued in the initial capitalization of
Wireless have been outstanding since January 1, 1994.
(2) OFFERING AND EXCHANGE
On March 21, 1995 and April 18, 1995, Wireless issued 5,000,000 and 369,350
shares, respectively, of Class A Common Stock in an initial public offering
(the "Offering") for net proceeds of $68,399. In connection with the Offering,
on March 21, 1995, Wireless issued 704,755 shares of Class A Common Stock and
17,288,578 shares of Class B Common Stock in exchange for 100 percent of the
Partnership interests of the Partnership (the "Exchange"). The assets and
liabilities received in the Exchange were recorded at their historical cost to
the Partnership and not revalued at fair value on the date of transfer. Since
the Exchange was between related parties it has been accounted for in a manner
similar to a pooling of interests (see note 1).
(3) ACQUISITIONS AND PURCHASE OF LICENSES
On October 31, 1994, the Company acquired the assets of and the licenses to
operate the non-wireline cellular telephone systems serving the Georgia Rural
Service Area Market Nos. 377, 378, 380 and 382, otherwise known as Georgia-7
RSA, Georgia-8 RSA, Georgia-10 RSA and Georgia-12 RSA, respectively, for an
aggregate purchase price of $91,720. The acquisition was accounted for by the
purchase method of accounting. In connection with this acquisition, $79,383 of
the purchase price was allocated to licenses. From the date of acquisition to
December 31, 1994, revenue, depreciation and amortization, operating loss and
net loss before interest expense related to the purchase price of the non-
wireline cellular telephone systems purchased were $1,803, $744, $(645) and
$(644), respectively.
On December 1, 1995, the Company purchased all of the outstanding stock of
Augusta Metronet, Inc. and Georgia Metronet, Inc., which owned either directly
(or in the case of Georgia Metronet, Inc., through its 97.9 percent interest
in the Savannah Cellular Limited Partnership) the licenses to operate the non-
wireline cellular
F-11
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
telephone systems in the Savannah and Augusta, Georgia MSAs, respectively, for
an aggregate purchase price of $158,397. The acquisition was accounted for by
the purchase method of accounting. In connection with this acquisition,
$136,940 of the purchase was allocated to licenses. From the date of
acquisition to December 31, 1995, revenue, depreciation and amortization,
operating income and net income before interest expense related to the
purchase price of the non-wireline cellular telephone systems were $2,126,
$508, $208 and $202, respectively.
On June 20, 1996, the Company acquired the assets of and the license to
operate the non-wireline cellular telephone system serving the Georgia Rural
Service Area Market No. 371, otherwise known as Georgia-1 RSA for an aggregate
purchase price of $31,616. The acquisition was accounted for by the purchase
method of accounting. In connection with the acquisition, $27,942 of the
purchase price was allocated to licenses. From the date of acquisition to
December 31, 1996, revenue, depreciation and amortization, operating loss and
net loss before interest expense related to the purchase of the non-wireline
cellular telephone system were $1,239, $556, $(278), and $(278), respectively.
On July 5, 1996, two of the Company's majority-owned subsidiaries acquired
the assets of and the license to operate the non-wireline cellular telephone
system serving the Georgia Rural Service Area Market No. 376, otherwise known
as Georgia-6 RSA for an aggregate purchase price of $35,972. The acquisition
was accounted for by the purchase method of accounting. In connection with the
acquisition, $33,491 of the purchase price was allocated to licenses. From the
date of acquisition to December 31, 1996, revenue, depreciation and
amortization, operating income, and net income before interest expense related
to the purchase of the non-wireline cellular telephone system were $2,682,
$578, $743, and $743, respectively.
Assuming the 1995 and 1996 acquisitions had occurred on January 1, 1995,
unaudited pro forma revenue, net (loss) income and net (loss) income per share
for the year ended December 31, 1995 would have been $132,958, $(12,437), and
$(.56), respectively, and for the year ended December 31, 1996, would have
been $163,393, $3,840, and $.15, respectively. These pro forma amounts assume
that the financing requirements were met by the incurrence of bank debt and
are not necessarily indicative of what the actual consolidated results of
operation might have been if the acquisition had been effective on January 1,
1995.
(4) NOTES PAYABLE AND LONG-TERM DEBT
On December 1, 1995, the Company entered into a loan agreement with a bank
which provides for a revolving line of credit of up to $5,000 to facilitate
day-to-day cash management needs. The loan agreement provides for interest at
the bank's prime rate and matures November 30, 1997.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
<S> <C> <C>
Credit agreement (a)......................................... $343,000 $337,000
Purchase obligations (b)..................................... 7,441 5,296
-------- --------
$350,441 $342,296
Less current installments.................................... 7,441 5,296
-------- --------
Long-term debt, excluding current installments............... $343,000 $337,000
======== ========
</TABLE>
(a) On December 1, 1995, the Company entered into an amended and restated
credit agreement with 21 banks which provides for a revolving line of credit
of up to $500,000, subject to certain limitations through June 30, 2004. This
credit agreement increased the Company's previously existing $275,000
revolving line of credit. The credit agreement provides for quarterly
commitment reductions commencing September 30, 1998 and
F-12
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
commitment reductions of 25 to 50 percent of Excess Cash Flow (as defined in
the credit agreement), if any, are required on April 15, 1998 and annually
thereafter. Interest is payable at variable rates and under various interest
rate options. The interest rate at December 31, 1996 ranged from 7.42 to 8.88
percent before the effect of the interest rate swap and cap agreements
outlined below. The credit agreement also provides for a commitment fee of .5
percent per year on any unused amounts of the credit agreement. Amounts
outstanding are secured by the assets of the Company.
The credit agreement provides for various compliance covenants and
restrictions, including items related to mergers or acquisition transactions,
the declaration or payment of dividends or other payments to stockholders,
capital expenditures and maintenance of certain financial ratios. At December
31, 1996, the Company was in compliance with all but one financial ratio
covenant. This covenant was based upon operating results for the year ended
December 31, 1996. The Company obtained a waiver of the noncompliance with
this 1996 financial ratio covenant.
The Company has entered into interest rate swap and cap agreements to reduce
the impact of changes in interest rates on its floating debt and thus were
entered into for purposes other than trading. At December 31, 1996, the
Company had outstanding ten interest rate swap agreements and four interest
rate cap agreements having a total notional value of $295,000. These interest
rate swap and cap agreements effectively change the Company's interest rate
exposure on a quarterly basis on $295,000 of credit.
F-13
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The cap and swap agreements are summarized as follows:
<TABLE>
<CAPTION>
MAXIMUM NOTIONAL
TYPE OF AGREEMENT MATURITY LIBOR(1) VALUE
<S> <C> <C> <C>
Cap....................................... Nov. 17, 1997 8.00 $ 10,000
Swap...................................... Nov. 17, 1997 8.10 10,000
Swap...................................... Nov. 17, 1997 7.48 20,000
Participating Cap (2)..................... Nov. 23, 1997 8.75 15,000
Participating Swap (3).................... Nov. 24, 1997 8.29 15,000
Trigger Cap (4)........................... Nov. 28, 1997 7.50/8.50 15,000
Pay Later Cap (5)......................... Jan. 12, 1998 8.50 20,000
Swap...................................... Aug. 3, 1998 5.26 25,000
Participating Swap (6).................... Aug. 10, 1998 5.98 15,000
Swap...................................... Aug. 6, 1999 6.36 25,000
Swap...................................... Aug. 7, 2000 6.04 50,000
Swap...................................... Aug. 20, 2000 6.07 25,000
Swap...................................... Oct. 10, 2000 6.03 25,000
Swap...................................... Oct. 11, 2000 5.99 25,000
--------
$295,000
========
</TABLE>
- ---------------------
(1) The maximum interest rate is 2.5 percent over the LIBOR stated in the
table below. The 2.5 percent interest rate over such LIBOR decreases if
certain leverage ratios are met by the Company.
(2) On 36 percent ($5,400) the interest rate is set at 8.75 percent, the
balance is set at the three-month LIBOR up to a maximum 8.75 percent.
(3) When the three-month LIBOR is less than 8.29 percent the Company
participates in 50 percent of the difference.
(4) When LIBOR is below 8.5 percent the rate is 7.5 percent, when LIBOR is 8.5
percent or above the rate is 8.5 percent.
(5) When the three-month LIBOR rate is 8.5 percent or higher the Company
receives a quarterly payment of $98.
(6) When the six-month LIBOR is less than 5.98 percent the Company
participates in 45 percent of the difference.
Fees in the amount of $240 were incurred in connection with certain of the
cap agreements and are being amortized over the lives of the respective cap
agreements.
The market value of the swap and cap agreements above, which has not been
reflected in the consolidated financial statements as of December 31, 1996, is
a loss of $1,545.
The Company is exposed to interest rate risk in the event of nonperformance
by the other party to the interest rate swap and cap agreements. However, the
Company does not anticipate nonperformance by any of the banks.
(b) In connection with the purchase of controlling interest in a non-
wireline cellular telephone system in 1991, the Company incurred certain
purchase obligations. The obligations, were retired in July 1996 and January
1997.
Based upon current borrowing rates the fair value approximates the carrying
value of the long-term debt outstanding under the credit agreement described
in (a) above and the purchase obligations described in (b) above.
F-14
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
<S> <C> <C>
1997........................... $ 5,296
1998........................... --
1999........................... --
2000........................... --
2001........................... 72,000
Thereafter..................... 265,000
--------
$342,296
========
</TABLE>
(5) INCOME TAXES
Components of income tax expense consist of the following:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
<S> <C> <C> <C>
Year ended December 31, 1995:
Current............................................. $ -- $-- $ --
Deferred............................................ 2,550 100 2,650
------ ---- ------
$2,550 $100 $2,650
====== ==== ======
Year ended December 31, 1996:
Current............................................. $ -- $869 $ 869
Deferred............................................ 1,795 60 1,855
------ ---- ------
$1,795 $929 $2,724
====== ==== ======
</TABLE>
The consolidated effective tax rate differs from the statutory United States
federal tax rate for the following reasons and by the following percentages:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER
31,
------------
1995 1996
<S> <C> <C>
Statutory United States federal tax rate........................ 34.0% 34.0%
Partnership loss prior to corporate status...................... 10.1 --
License amortization not deductible for tax..................... 7.7 32.5
Net operating loss carryforwards................................ (59.0) (42.8)
State taxes..................................................... -- 8.3
Recognition of deferred income taxes related to the difference
between financial statement and income tax bases of certain
assets and liabilities in connection with the Exchange......... 73.5 --
Other........................................................... 7.2 4.8
----- -----
Consolidated effective tax rate................................. 73.5% 36.8%
===== =====
</TABLE>
F-15
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The components of the deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts..................... $ 658 $ 609
Nondeductible accruals.............................. 163 221
Net operating loss carryforwards.................... 4,314 4,100
-------- --------
Total deferred tax assets......................... $ 5,135 $ 4,930
Valuation allowance................................. (3,898) --
-------- --------
$ 1,237 $ 4,930
-------- --------
Deferred tax liabilities:
Property, plant and equipment....................... (7,323) (7,415)
Licenses............................................ (2,729) (8,185)
-------- --------
Total deferred tax liabilities.................... $(10,052) $(15,600)
-------- --------
Deferred tax liability, net......................... $ (8,815) $(10,670)
======== ========
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1996 was a decrease of $3,898. A valuation allowance had been recorded
primarily to offset the gross deferred tax assets created by net operating
loss carryforwards until such time as earnings of the Company or alternative
tax planning strategies warranted full recognition. Management believes that
it is more likely than not that the results of future operations will generate
sufficient taxable income to realize that portion of the deferred tax asset
related to the net operating loss carryforwards. The net operating loss
carryforwards totaled approximately $11,700 at December 31, 1996 and expire in
amounts ranging from approximately $400 to $4,100 through 2011. For
carryforwards of approximately $10,900, generated in periods prior to the
Exchange, utilization is limited to the subsidiary that generated the
carryforwards, unless the Company utilizes alternative tax planning
strategies.
(6) RELATED PARTY TRANSACTIONS
During 1994, the Company had a subordinated demand note of $20,000 with
Palmer Broadcasting Limited Partnership, a majority-owned subsidiary of PCI.
Interest expense under the note was $1,611 for the year ended December 31,
1994. The note was paid off in 1994.
PCI had previously extended the Company a line of credit in the amount of
$3,000 that was used for the initial operations of the Company, to pay
organization expenses and to pay expenses of the Offering. The line of credit
bore interest at 2 percent above the prime rate. Interest expense on the line
of credit amounted to $117 for the year ended December 31, 1994. The
borrowings totaling $1,615 were repaid with the proceeds of the Offering.
During 1994, the Company earned $78 of interest income from advances to PCI.
During 1994, the Company performed certain management functions for PCI.
These functions included general management, human resources administration,
accounting, and computer services. PCI was charged a fee based on the
Company's estimate of its time spent managing PCI and usage of its computer.
Concurrently with the Offering and the Exchange, the Company and PCI entered
into both a transitional management and administrative services agreement and
a computer services agreement that extend each December 31 for
F-16
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
additional one-year periods unless and until either party notifies the other.
The fees from these arrangements amounted to a total of $509, $492, and $534
for the years ended December 31, 1994, 1995, and 1996, respectively, and are
included as a reduction of selling, general and administrative expenses.
During 1994, PCI provided certain tax consulting services to the Company.
Concurrently with the Offering and the Exchange, the Company and PCI entered
into a tax consulting agreement that extends each December 31 for additional
one-year periods unless and until either party notifies the other. The fees
for tax consulting services amounted to a total of $67, $84, and $120 for the
years ended December 31, 1994, 1995, and 1996, respectively, and are included
in selling, general and administrative expenses.
PCI has a 401(k) plan with a noncontributory retirement feature and a
matching provision for employees who meet length of service and other
requirements. The Company participates in this plan and was allocated 401(k)
retirement and matching expense of $305, $493, and $696 for the years ended
December 31, 1994, 1995, and 1996, respectively.
(7) COMMON STOCK AND STOCK PLANS
During 1994, the Company amended its certificate of incorporation to
increase the number of authorized shares of common stock from 60,000,000 to
91,000,000 and to provide for Class A Common Stock and Class B Common Stock.
The Class A Common Stock has one vote per share. The Class B Common Stock,
which may be owned only by PCI or certain successors of PCI and of which no
shares may be issued subsequent to the Offering, has five votes per share,
provided, however, that, so long as any Class A Common Stock is issued and
outstanding, at no time will the total outstanding Class B Common Stock have
the right to cast votes having more than 75 percent of the total voting power
of the common stock in the aggregate. Shares of Class B Common Stock shall be
converted into Class A Common Stock on a share-for-share basis: (i) at any
time at the option of the holder; (ii) immediately upon the transfer of shares
of Class B Common Stock to any holder other than a successor of PCI; (iii)
immediately if the shares of Class B Common Stock held by PCI or its
successors constitute 33 percent or less of the outstanding shares of the
Company; (iv) at the end of 20 years from original issuance of those shares of
Class B Common Stock; or (v) if more than 50 percent of the equity interests
in PCI become beneficially owned by persons other than: (i) beneficial owners
of PCI as of December 29, 1994 ("Current PCI Beneficial Owners"); (ii)
affiliates of Current PCI Beneficial Owners; (iii) heirs or devisees of any
individual Current PCI Beneficial Owner, successors of any corporation or
partnership which is a Current PCI Beneficial Owner and beneficiaries of any
trust which is a Current PCI Beneficial Owner; and (iv) any relative, spouse
or relative of a spouse of any Current PCI Beneficial Owner.
The Company adopted a Stock Option Plan in connection with the Offering,
under which options for an aggregate of 1,600,000 shares of Class A Common
Stock are available for grants to key employees. The Company also adopted a
Director's Stock Option Plan in connection with the Offering, under which
options for an aggregate of 300,000 shares of Class A Common Stock are
available for grants to directors who are not officers or employees of the
Company. Stock options under both plans are granted with an exercise price
equal to the stock's fair value at the date of grant. The stock options
granted under the Stock Option Plan have 10-year terms and vest and become
exercisable ratably over three years from the date of grant. The stock options
granted under the Director's Stock Option Plan are vested and become fully
exercisable upon the date of the grant. At December 31, 1996, there were
options with respect to 693,334 and 45,000 shares of Class A Common Stock
outstanding under the Stock Option Plan and the Director's Stock Option Plan,
respectively. At December 31, 1996, there were 880,000 and 255,000 additional
shares available for grant under the Stock Option Plan and the Director's
Stock Option Plan, respectively.
The Company applies APB Opinion No. 25 in accounting for its Stock Option
Plan and Director's Stock Option Plan ("the Plans") and accordingly, no
compensation cost has been recognized for its stock options in
F-17
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS No.123, the Company's net income (loss) and net income (loss) per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------
1995 1996
<S> <C> <C>
Net income-as reported...................................... $ 954 $4,682
Net (loss) income-pro forma................................. $(777) $2,850
Net income per share-as reported............................ $ .04 $ .18
Net (loss) income per share-pro forma....................... $(.03) $ .11
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the weighted-average assumptions
as follows: dividend yield of 0.0%; expected volatility of 101%; risk-free
interest rate of 5.5%; and expected lives of five years. The fair value of the
option grants in 1995 and 1996 were $11.04 and $13.36 per share, respectively.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Balance December 31, 1994 -- --
Granted......................................... 692,500 $14.25
Exercised....................................... (20,000) 14.25
-------
Balance December 31, 1995......................... 672,500 14.25
Granted......................................... 72,500 17.25
Exercised....................................... (6,666) 14.25
-------
Balance December 31, 1996......................... 738,334 14.54
=======
</TABLE>
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $14.25--$17.25 and 8.3
years, respectively.
At December 31, 1995 and 1996, the number of options exercisable was 37,500
and 250,000, respectively, and the weighted average exercise price of those
options was $14.25 and $14.34, respectively.
The Company adopted a stock purchase plan for employees (the "Employee Stock
Purchase Plan") and a stock purchase plan for non-employee directors (the
"Non-Employee Director Stock Purchase Plan"). Under the Employee Stock
Purchase Plan, 160,000 shares of Class A Common Stock are available for
purchase by eligible employees of the Company or any of its subsidiaries.
Under the Non-Employee Director Stock Purchase Plan, 25,000 shares of Class A
Common Stock are available for purchase by non-employee directors of the
Company. The purchase price of each share of Class A Common Stock purchased
under the Employee Stock Purchase Plan or the Non-Employee Director Stock
Purchase Plan will be the lesser of 90 percent of the fair market value of the
Class A Common Stock on the first trading day of the plan year or on the last
day of such plan year; provided, however, that in no event shall the purchase
price be less than the par value of the stock. Both plans will terminate in
2005, unless terminated at an earlier date by the board of directors. During
the year ended December 31, 1996, 15,541 shares were issued under the Employee
Stock Purchase Plan and 1,702 shares were issued under the Non-Employee
Director Stock Purchase Plan at a purchase price of $16.85. Compensation cost
computed under the provisions of SFAS No. 123 related to the shares issued
under the Employee Stock Purchase Plan and the Non-Employee Director Stock
Purchase Plan is immaterial to the consolidated financial statements.
F-18
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(8) COMMITMENTS AND CONTINGENCIES
LEASES
The Company occupies certain buildings and uses certain tower sites, cell
sites and equipment under noncancellable operating leases which expire through
2014. The operating leases for a building and certain tower sites and cell
sites are with related parties.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
RELATED PARTIES OTHERS
<S> <C> <C>
1997............................................. $285 $ 3,429
1998............................................. 285 2,899
1999............................................. 52 2,507
2000............................................. 14 2,011
2001............................................. -- 1,348
Later years through 2014......................... -- 4,522
---- -------
Total minimum lease payments................... $636 $16,716
==== =======
</TABLE>
Rental expense was $1,609, $2,487, and $3,551 for the years ended December
31, 1994, 1995 and 1996, respectively, of which $253, $269, and $278 was paid
to related parties for 1994, 1995 and 1996, respectively.
CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial statements.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with six officers of the Company. The
agreements have terms of two or three years and provide for aggregate annual
salaries of $1,181 in 1997. Each employment agreement provides that if the
officer is terminated by the Company without cause (as defined therein) or
terminates the agreement for good reason (as defined therein), the Company
will pay the officer the full base salary and benefits which would have been
paid to such officer during the remaining term of the agreement.
F-19
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 FIRST QUARTER(A) SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Total Revenue........... $22,374 $25,931 $26,055 $30,546 $104,906
======= ======= ======= ======= ========
Operating Income........ $ 4,872 $ 6,892 $ 8,152 $ 6,666 $ 26,582
======= ======= ======= ======= ========
Net (Loss) Income....... $(3,958) $ 1,620 $ 2,801 $ 491 $ 954
======= ======= ======= ======= ========
Net (Loss) Income Per
Share*................. $ (.21) $ .07 $ .12 $ .02 $ .04
======= ======= ======= ======= ========
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 FIRST QUARTER (B) SECOND QUARTER (B) THIRD QUARTER (B) FOURTH QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Total Revenue........... $36,950 $40,031 $41,171 $41,591 $159,743
======= ======= ======= ======= ========
Operating Income........ $ 8,514 $11,281 $11,977 $ 9,405 $ 41,177
======= ======= ======= ======= ========
Net Income (Loss)....... $ 76 $ 1,684 $ 2,976 $ (54) $ 4,682
======= ======= ======= ======= ========
Net Income (Loss) Per
Share*................. $ .00 $ .07 $ .10 $ (.00) $ .18
======= ======= ======= ======= ========
</TABLE>
- ---------------------
(a) First quarter loss was increased by $2,650 due to the recognition of
deferred income taxes relating to the difference between financial
statement and income tax return bases of certain assets and liabilities
in connection with the Exchange.
(b) Certain reclassifications have been made to conform to the fourth quarter
presentation.
* Weighted average shares outstanding for the quarters are calculated
independent of the weighted average shares outstanding for the year;
therefore, quarterly net income (loss) per share may not total to annual
net income per share.
(10) SUBSEQUENT EVENT
On February 1, 1997, one of the Company's majority-owned subsidiaries
acquired the assets of and license to operate the non-wireline cellular
telephone system serving the Georgia Rural Service Area Market No. 383,
otherwise known as Georgia-13 RSA for a total purchase price of $30,000,
subject to certain adjustments.
F-20
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
---------------- --------------
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents.................. $ 1,698 $ 1,740
Trade Accounts Receivable, Net of Allowance
for Doubtful Accounts..................... 18,784 19,049
Receivable from Other Cellular Carriers.... 1,706 3,669
Deferred Income Taxes...................... 830 980
Prepaid Expenses and Deposits.............. 2,313 1,794
Inventory.................................. 5,106 3,181
-------------- --------------
Total Current Assets..................... $ 30,437 $ 30,413
Net Property, Plant and Equipment............ 132,438 157,596
Licenses, Net of Amortization................ 375,808 398,845
Other Intangible Assets and Other Assets, at
Cost Less Accumulated Amortization.......... 11,259 10,348
-------------- --------------
$ 549,942 $ 597,202
============== ==============
LIABILITIES AND EQUITY
Current Liabilities:
Notes Payable.............................. $ 1,366 $ 2,321
Current Installments of Long-Term Debt..... 5,296 --
Accounts Payable........................... 10,394 9,032
Accrued Expenses........................... 8,399 11,896
Other Liabilities.......................... 4,686 4,874
-------------- --------------
Total Current Liabilities................ $ 30,141 $ 28,123
Long-Term Debt, Excluding Current
Installments................................ 337,000 378,000
Deferred Income Taxes........................ 11,500 15,326
Minority Interests........................... 6,371 7,123
-------------- --------------
Total Liabilities........................ $ 385,012 $ 428,572
-------------- --------------
Stockholders' Equity......................... 164,930 168,630
-------------- --------------
$ 549,942 $ 597,202
============== ==============
</TABLE>
- ---------------------
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
F-21
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
1996 1997
(DOLLAR AMOUNTS IN THOUSANDS
EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Revenue:
Service...................................... $ 72,741 $ 88,140
Equipment Sales and Installation............. 4,239 5,088
-------------- --------------
Total Revenue.............................. $ 76,980 $ 93,228
-------------- --------------
Operating Expenses:
Engineering, Technical and Other Direct...... 14,939 15,554
Cost of Equipment............................ 8,397 11,057
Selling, General and Administrative.......... 21,977 27,204
Depreciation and Amortization................ 11,872 15,129
-------------- --------------
Total Operating Expenses................... $ 57,185 $ 68,944
-------------- --------------
Operating Income........................... $ 19,795 $ 24,284
-------------- --------------
Other Income (Expense):
Interest Expense, Net........................ (16,006) (16,113)
Other (Expense) Income, Net.................. (58) 162
-------------- --------------
Total Other Expense........................ $ (16,064) $ (15,951)
-------------- --------------
Income Before Minority Interest Share of Income
and Income Taxes.............................. $ 3,731 $ 8,333
Minority Interest Share of Income.............. (1,023) (782)
-------------- --------------
Income Before Income Taxes..................... $ 2,708 $ 7,551
Income Taxes................................... (948) (3,851)
-------------- --------------
Net Income................................. $ 1,760 $ 3,700
============== ==============
Net Income Per Share of Common Stock........... $ 0.07 $ 0.13
============== ==============
Average Shares Outstanding..................... 23,940,039 27,813,259
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-22
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
CLASS A CLASS B ADDITIONAL TREASURY STOCK TOTAL
----------------- ----------------- PAID-IN RETAINED -------------- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1995............... 6,095,772 $ 61 17,293,578 $173 $ 72,466 $ 1,853 -- $ -- $74,553
Public offering, net of
issuance costs
of $5,826.............. 5,000,000 50 -- -- 94,124 -- -- -- 94,174
Exercise of stock
options................ 6,666 -- -- -- 95 -- -- -- 95
Employee and non-
employee director stock
purchase plans......... 17,243 -- -- -- 290 -- -- -- 290
Treasury shares
purchased.............. -- -- -- -- -- 600,000 (8,864) (8,864)
Net income.............. -- -- -- -- -- 4,682 -- -- 4,682
---------- ---- ---------- ---- -------- ------- ------- -------- --------
Balances at December 31,
1996................... 11,119,681 $111 17,293,578 $173 $166,975 $ 6,535 600,000 $(8,864) $164,930
Net income.............. -- -- -- -- -- 3,700 -- -- 3,700
---------- ---- ---------- ---- -------- ------- ------- -------- --------
Balances at June 30,
1997................... 11,119,681 $111 17,293,578 $173 $166,975 $10,235 600,000 $ (8,864) $168,630
========== ==== ========== ==== ======== ======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
<S> <C> <C>
1996 1997
-------------- --------------
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $ 1,760 $ 3,700
-------------- --------------
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization.............. 11,872 15,129
Minority interest share of income.......... 1,023 782
Deferred income taxes...................... 498 3,676
Loss (gain) on disposal of property........ 59 (9)
Interest deferred and added to long-term
debt....................................... 326 --
Payment of deferred interest............... -- (1,514)
(Increase) decrease in trade accounts
receivable................................. (809) 500
Decrease in inventory...................... 358 2,085
(Decrease) increase in accounts payable and
accrued expenses........................... (1,629) 1,799
Change in other accounts................... 2,345 (576)
-------------- --------------
Total adjustments........................ $ 14,043 $ 21,872
-------------- --------------
Net cash provided by operating
activities............................... $ 15,803 $ 25,572
-------------- --------------
Cash flows from investing activities:
Capital expenditures......................... (21,639) (31,700)
Proceeds from sales of property and
equipment.................................... 4 201
Purchase of cellular systems................. (31,500) (31,260)
Collection of purchase price adjustment...... 2,452 --
Purchases of minority interests.............. (1,254) (794)
Increase in other intangible assets and other
assets....................................... (1,710) (150)
-------------- --------------
Net cash used in investing activities...... $ (53,647) $ (63,703)
-------------- --------------
Cash flows from financing activities:
Increase in short-term notes payable......... 2,535 955
Repayment of long-term debt.................. (100,050) (3,782)
Proceeds from long-term debt................. 39,000 41,000
Public offering proceeds, net................ 94,295 --
-------------- --------------
Net cash provided by financing activities.. $ 35,780 $ 38,173
-------------- --------------
Net (decrease) increase in cash and cash
equivalents................................ $ (2,064) $ 42
Cash and cash equivalents at the beginning of
period......................................... 3,436 1,698
-------------- --------------
Cash and cash equivalents at the end of period. $ 1,372 $ 1,740
============== ==============
Supplemental disclosure of cash flow
information:
Income taxes paid (received), net............ $ 1,172 $ (617)
============== ==============
Interest paid................................ $ 14,460 $ 16,328
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Palmer
Wireless, Inc. and subsidiaries (the "Company") have been prepared without
audit pursuant to Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financials. In the opinion of management, all adjustments (none of which were
other than normal recurring items) considered necessary for a fair
presentation have been included. The results of operations for the interim
periods reported are not necessarily indicative of results to be expected for
the year.
The computation of net income per share is based on the weighted average
number of common and, as appropriate, dilutive common equivalent shares
(common stock options using the treasury stock method) outstanding during the
periods presented.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 Statement of Operations
to conform to the 1997 presentation.
(2) ACQUISITION AND PURCHASE OF LICENSE
On February 1, 1997, one of the Company's majority-owned subsidiaries
acquired the assets of and license to operate the non-wireline cellular
telephone system serving the Georgia Rural Service Area Market No. 383,
otherwise known as Georgia-13 RSA, for a total purchase price of $31,260.
(3) PROPOSED SALE
On May 23, 1997, the Company entered into an agreement to sell its
outstanding shares of common stock to Price Communications Corporation for a
purchase price of $17.50 per share, for an aggregate purchase price of
approximately $488,000. In addition, Price Communications Corporation has also
agreed to repay up to $389,000 of outstanding indebtedness of the Company.
F-25
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 13
The Acquisition........................................................... 19
Use of Proceeds........................................................... 22
Capitalization............................................................ 23
Unaudited Pro Forma Condensed Consolidated Financial Statements........... 24
Selected Consolidated Financial Data...................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 34
The Exchange Offer........................................................ 44
Business.................................................................. 50
Management................................................................ 63
Principal Stockholders.................................................... 67
Description of New Credit Facility........................................ 67
Description of Notes...................................................... 69
United States Federal Income Tax Consequences of the Exchange Offer....... 95
Plan of Distribution...................................................... 95
Legal Matters............................................................. 96
Experts................................................................... 96
Available Information..................................................... 96
Certain Terms............................................................. 97
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$175,000,000
PRICE COMMUNICATIONS WIRELESS, INC.
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
-----------------------
PROSPECTUS
-----------------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty,
except (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the DGCL (providing for liability of directors for the
unlawful payment of dividends or unlawful stock purchases or redemptions) or
(iv) for any transaction from which a director derived an improper personal
benefit.
Section 145 of the DGCL empowers the Company to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought before or threatened by reason of the fact that the person
was a director, officer, employee or agent of such company, or is or was
serving as such with respect to another entity at the request of such company.
The DGCL also provides that the Company may purchase insurance on behalf of
any such director, officer, employee or agent.
The Company's Certificate of Incorporation and By-laws provide in effect for
the indemnification by the Company of each director and officer of the Company
to the fullest extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (see index to exhibits at E-1)
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes;
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
II-1
<PAGE>
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, NEW YORK, ON
SEPTEMBER 24, 1997.
PRICE COMMUNICATIONS WIRELESS, INC.
/s/ Robert Price
By: _________________________________
ROBERT PRICE
DIRECTOR, PRESIDENT AND TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Robert Price Director, September 24,
_____________________________________ President and 1997
ROBERT PRICE Treasurer
(Principal
Executive
Officer,
Financial Officer
and Accounting
Officer)
/s/ Ashley B. Dixon Vice President and September 24,
_____________________________________ Corporate Secretary 1997
ASHLEY B. DIXON (Principal Executive
Officer)
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 The Merger Agreement
3.1 Articles of Incorporation of the Company
3.2 By-laws of the Company
4.1 Indenture to 11 3/4% Senior Subordinated Notes due 2007 between the
Company and Bank of Montreal Trust Company, as Trustee (including form
of Note)
5.1 Opinion of Davis Polk & Wardwell regarding the validity of the New
Notes
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG Peat Marwick LLP relating to the financial statements
of Palmer
23.2 Consent of Davis Polk & Wardwell (see exhibit 5.1)
25.1 Statement of Eligibility of Bank of Montreal Trust Company
99.1 Form of Letter of Transmittal to 11 3/4% Senior Subordinated Notes due
2007 of the Company
99.2 Form of Notice of Guaranteed Delivery to 11 3/4% Senior Subordinated
Notes due 2007 of the Company
99.3 Form of Instruction to Registered Holder and/or Book-Entry Transfer of
Participant from Owner of the Company
99.4 Form of Letter to Clients
99.5 Form of Letter to Registered Holders and Depository Trust Company
Participants
</TABLE>
E-1
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this
23rd day of May, 1997, by and among PALMER WIRELESS, INC., a Delaware
corporation (the "Company"), PRICE COMMUNICATIONS CORPORATION, a New York
corporation ("Acquiror"), and PRICE COMMUNICATIONS CELLULAR MERGER CORP., a
Delaware corporation ("Merger Sub").
WHEREAS, the Boards of Directors of the Company, Acquiror and Merger Sub
have each determined that it is fair to, and in the best interests of their
respective stockholders that Merger Sub, a wholly-owned subsidiary of
Acquiror, merge with and into the Company, pursuant to and subject to the
terms and conditions of this Agreement and the Delaware General Corporation
Law ("Delaware Law"); and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, Palmer Communications
Incorporated, a Delaware corporation ("PCI"), has entered into a voting
agreement with Acquiror (the "Voting Agreement") pursuant to which, among
other things, PCI has agreed to vote its shares of common stock of the Company
in favor of this Agreement, the Merger (as defined below) and the other
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agrees as follows:
ARTICLE I
The Merger
Section 1.1. The Merger.
Upon the terms and subject to the conditions set forth in this Agreement
(including approval of the Federal Communications Commission (the "FCC")), and
in accordance with Delaware Law, at the Effective Time (as defined in Section
1.2) Merger Sub shall be merged with and into the Company (the "Merger"). As a
result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the
Merger (sometimes referred to herein as the "Surviving Corporation") and a
wholly-owned subsidiary of Acquiror. The name of the Company shall continue as
the name of the Surviving Corporation.
Section 1.2. Effective Time.
At the Closing, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and in
such form as approved by the Company and Acquiror prior to such filing (the
date and time of the filing of the Certificate of Merger or the time specified
therein being the "Effective Time").
Section 1.3. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the rights, privileges, powers and franchises of Merger
Sub and the Company, shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and the Company shall become the debts,
liabilities and duties of the Surviving Corporation.
1
<PAGE>
Section 1.4. Certificate of Incorporation; Bylaws.
At the Effective Time, subject to the terms and conditions of Section 7.8
hereof, (a) the certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time and as amended by the Certificate of
Merger, shall be the certificate of incorporation of the Surviving
Corporation, and (b) the bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation.
Section 1.5. Directors and Officers.
The directors of Merger Sub (or such other or additional individuals as
Acquiror may designate prior to Closing) shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation; and the officers of
the Company shall continue as the officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
Section 1.6. Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place as promptly as practicable after
satisfaction of the latest to occur or, if permissible, waiver of the
conditions set forth in Article VIII hereof (the "Closing Date"), at the
offices of Hogan & Hartson L.L.P., Columbia Square, 555 13th Street, N.W.,
Washington, D.C. 20004, unless another date or place is agreed to in writing
by the parties hereto.
Section 1.7. Subsequent Actions.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to continue in,
vest, perfect or confirm of record or otherwise in the Surviving Corporation
its right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of such
constituent corporations, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties, privileges, franchises
or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
Conversion of Securities; Exchange of Certificates
Section 2.1. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Acquiror, Merger Sub, the Company or the holders of any of the
following securities:
(a) Company Common Stock. Subject to the other provisions of this Section
2.1, each share of (i) Class A common stock, par value $.01 per share, of
the Company ("Class A Common Stock"), issued and outstanding immediately
prior to the Effective Time (excluding any shares described in Sections
2.1(b) and (c) and any Dissenting Shares (as hereinafter defined)), and
(ii) Class B common stock, par value $.01 per share, of the Company ("Class
B Common Stock"; together with the Class A Common Stock, the "Common
Stock"), shall be converted into the right to receive Seventeen Dollars and
Fifty Cents ($17.50) in cash, without interest (the "Per Share Amount").
All such shares of Common Stock shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter
represent only the right to receive the Merger
2
<PAGE>
Consideration as described below. The holders of certificates previously
evidencing such shares of Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares
of Common Stock, except as otherwise provided herein or by law. Each such
certificate previously evidencing such shares of Common Stock shall be
exchanged for the Per Share Amount multiplied by the number of shares
previously evidenced by the canceled certificate upon the surrender of such
certificate in accordance with the provisions of Section 2.2, without
interest;
(b) Acquiror-Owned Shares. All shares of capital stock of the Company
owned, directly or indirectly, by Acquiror, Merger Sub or any Acquiror
Subsidiary (as defined in Section 5.1) shall be canceled and extinguished
without any conversion thereof and no cash shall be delivered or
deliverable in exchange therefor;
(c) Treasury Stock. All shares of capital stock of the Company held in
the treasury of the Company immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof and no cash
shall be delivered or deliverable in exchange therefor; and
(d) Merger Sub Stock. Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
Section 2.2. Payment.
(a) Paying Agent. As of the Effective Time, Acquiror shall, on behalf of
Merger Sub, deposit with a bank theretofore designated by the Company and
Acquiror (the "Paying Agent"), for the benefit of the holders of shares of
Common Stock (excluding any shares described in Sections 2.1(b) and (c) and
any Dissenting Shares), for payment in accordance with this Article II,
through the Paying Agent, cash in an amount equal to the Per Share Amount
multiplied by the number of shares of Common Stock outstanding immediately
prior to the Effective Time (excluding any shares described in Sections 2.1(b)
and (c) and any Dissenting Shares) (such cash being hereinafter referred to as
the "Payment Fund"). Acquiror shall cause the Paying Agent, pursuant to
irrevocable instructions, to deliver the cash contemplated to be paid pursuant
to Section 2.1(a) out of the Payment Fund. The Payment Fund shall not be used
for any other purpose.
(b) Payment Procedures. Promptly after the Effective Time, Acquiror shall
cause the Paying Agent to mail to each record holder, as of the Effective
Time, of an outstanding certificate (each a "Certificate" and collectively,
the "Certificates") that immediately prior to the Effective Time evidenced
outstanding shares of Common Stock (excluding any shares described in Sections
2.1(b) and (c) and any Dissenting Shares), a form letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor the consideration set forth in Section 2.1(a) (the "Merger
Consideration"), and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate shall represent for all purposes only the right
to receive the consideration set forth in Section 2.1(a), without any interest
thereon.
(c) No Further Rights in Common Stock. All cash paid upon conversion of the
shares of Common Stock in accordance with the terms of this Article II, and
all cash paid pursuant to Section 2.5, shall be deemed to have been paid in
full satisfaction of all rights pertaining to such shares of Common Stock.
(d) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of Common Stock for one hundred eighty
(180) days after the Effective Time shall be delivered to Acquiror, upon
demand, and any holders of Common Stock that have not theretofore complied
with this Article II shall thereafter look only to the Surviving Corporation
and Acquiror for the Merger Consideration to which they are entitled.
3
<PAGE>
(e) No Liability. Neither Acquiror nor the Surviving Corporation shall be
liable to any holder of shares of Common Stock for any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate
evidencing shares of Common Stock shall have been lost, stolen or destroyed,
upon the making of an affidavit setting forth that fact by the person claiming
such lost, stolen or destroyed Certificate(s) and granting a reasonable
indemnity against any claim that may be made against Acquiror or the Paying
Agent with respect to such Certificate(s), Acquiror shall cause the Paying
Agent to pay to such person the Merger Consideration with respect to such
lost, stolen or destroyed Certificate(s).
Section 2.3. Company Options; Stock Purchase Plan.
(a) Company Options. Immediately prior to the Effective Time, (i) each
outstanding stock option to purchase shares of Class A Common Stock (a "Plan
Option") granted under the Company's 1995 Stock Option Plan and 1995
Directors' Stock Option Plan, each as amended to the date of this Agreement
(collectively, the "Company Stock Option Plans"), and (ii) each phantom option
to purchase shares of Class A Common Stock described on Schedule 3.3 hereto (a
"Phantom Option"; together with the Plan Options, the "Options"), whether or
not any such Options are exercisable, shall be terminated by the Company, and
Acquiror shall, on behalf of Merger Sub, pay to the holder thereof at the
Effective Time, in consideration for such termination, an amount in cash equal
to the excess, if any, of the Per Share Amount over the per share exercise
price of such Option, multiplied by the number of shares of Class A Common
Stock into which the Option remains unexercised. Any such payment shall be
subject to all applicable federal, state and local tax withholding
requirements. The Company shall terminate the Company Stock Option Plans as of
the Effective Time, and take all such action as is necessary to terminate the
Options as of the Effective Time, so that on and after the Effective Time no
holder of an Option shall have any option to purchase shares of Class A Common
Stock or any other equity interest in the Company under the Company Stock
Option Plans or the Phantom Option agreements.
(b) Employee Stock Purchase Plan. Effective as of the Effective Time, the
Company's 1995 Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") shall be terminated and the then applicable Payroll Deduction Period
(as defined in the Employee Stock Purchase Plan) shall be deemed to have ended
on the last trading day of the Class A Common Stock immediately prior to the
Effective Time. At the Effective Time, Acquiror shall, on behalf of Merger
Sub, pay to each Company employee who is a participant in the Employee Stock
Purchase Plan as of the Effective Time, an amount in cash equal to the Per
Share Amount multiplied by the number of shares of Class A Common Stock which
the accumulated funds in such employee's account would have been entitled to
purchase under the terms of the Employee Stock Purchase Plan as of the end of
such Payroll Deduction Period. Such payments shall be deemed to satisfy all
obligations of the Company and the Surviving Corporation to the participants
in the Employee Stock Purchase Plan. Such payments shall be subject to all
applicable federal, state and local tax withholding requirements. All funds in
the accounts of the participants as of the Effective Time after such payments,
shall belong to and be disbursed in accordance with the instructions of
Acquiror. The Company shall terminate the Employee Stock Purchase Plan as of
the Effective Time so that on and after the Effective Time no former
participant in the Employee Stock Purchase Plan shall have any right to
purchase shares of Class A Common Stock or any other equity interest in the
Company under the Employee Stock Purchase Plan.
(c) Non-Employee Director Stock Purchase Plan. Effective as of the Effective
Time, the Company's 1995 Non-Employee Director Stock Purchase Plan (the
"Director Stock Purchase Plan"; together with the Employee Stock Purchase
Plan, the "Company Stock Purchase Plans"), shall be terminated and the then
applicable Accumulation Period (as defined in the Director Stock Purchase
Plan) shall be deemed to have ended on the last trading day of the Class A
Common Stock immediately prior to the Effective Time. At the Effective Time,
Acquiror shall, on behalf of Merger Sub, pay to each member of the Company's
Board of Directors who is a participant in the Director Stock Purchase Plan as
of the Effective Time, an amount in cash equal to the Per Share Amount
multiplied by the number of shares of Class A Common Stock which the
accumulated funds in
4
<PAGE>
such director's account would have been entitled to purchase under the terms
of the Director Stock Purchase Plan as of the end of such Accumulation Period.
Such payments shall be deemed to satisfy all obligations of the Company and
the Surviving Corporation to the participants in the Director Stock Purchase
Plan. Such payments shall be subject to all applicable federal, state and
local tax withholding requirements. All funds in the accounts of the
participants as of the Effective Time after such payments, shall belong to and
be disbursed in accordance with the instructions of Acquiror. The Company
shall terminate the Director Stock Purchase Plan as of the Effective Time so
that on and after the Effective Time no former participant in the Director
Stock Purchase Plan shall have any right to purchase shares of Class A Common
Stock or any other equity interest in the Company under the Director Stock
Purchase Plan.
Section 2.4. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company with respect
to all shares of capital stock of the Company shall be closed and no further
registration of transfers of such shares of capital stock shall thereafter be
made on the records of the Company. On or after the Effective Time, any
Certificates for shares of Common Stock (excluding any shares described in
Sections 2.1(b) and (c) and Dissenting Shares) presented to the Paying Agent,
the Surviving Corporation or Acquiror for any reason shall be converted into
the Merger Consideration.
Section 2.5. Dissenting Shares.
Notwithstanding any other provisions of this Agreement to the contrary,
shares of Class A Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by stockholders who shall not
have voted in favor of the Merger or consented thereto in writing and who
shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of Delaware Law (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders shall be entitled to receive payment
of the appraised value of such shares of Class A Common Stock held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Class A Common Stock under such Section 262 shall thereupon be
deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration, upon surrender, in the manner provided in Section 2.2,
of the certificate or certificates that formerly evidenced such shares of
Class A Common Stock.
ARTICLE III
Representations and Warranties of the Company
The Company hereby represents and warrants to Acquiror and Merger Sub as
follows:
Section 3.1. Organization and Qualification; Subsidiaries.
(a) The Company and each Subsidiary (as defined below) of the Company (each
a "Company Subsidiary" and collectively, the "Company Subsidiaries") is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. The Company
and each Company Subsidiary is duly qualified to conduct its business, and is
in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which would not have a
Company Material Adverse Effect (as defined below). The Company and each
Company Subsidiary has the requisite power and authority and any necessary
governmental authority, franchise, license or permit to own, operate, lease
and otherwise to hold and operate its assets and properties and to carry on
the businesses as now being conducted, except for such failures which would
not in the aggregate have a Company Material Adverse Effect. The Company has
no Subsidiaries (as defined below) or any equity or similar interest in any
entity other than those listed in Schedule 3.1. As used herein, the term
"Company Material Adverse Effect" means any material adverse effect on the
business, assets, financial condition or results of operations of the Company
and the Company Subsidiaries taken as a whole.
5
<PAGE>
(b) For purposes of this Agreement, a "Subsidiary" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other Subsidiary) (i)
owns, directly or indirectly, fifty percent (50%) or more of the stock,
partnership interests or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or other legal
entity; or (ii) possesses, directly or indirectly, control over the direction
of management or policies of such corporation, partnership, joint venture or
other legal entity (whether through ownership of voting securities, by
agreement or otherwise).
Section 3.2. Certificate of Incorporation and Bylaws.
The Company has heretofore made available to Acquiror a complete and correct
copy of the certificate or articles of incorporation and the bylaws of the
Company and each Company Subsidiary that is a corporation, and a correct copy
of the partnership agreement for each Company Subsidiary that is a
partnership, each as amended to date. Each such certificate or articles of
incorporation, bylaws and partnership agreement is in full force and effect.
Neither the Company nor any Company Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws,
partnership agreement or other organizational document.
Section 3.3. Capitalization.
The authorized capital stock of the Company consists, as of the date of this
Agreement, of: (a) seventy-three million (73,000,000) shares of Class A Common
Stock, of which ten million five hundred nineteen thousand six hundred and
eighty-one (10,519,681) shares are issued and outstanding; (b) eighteen
million (18,000,000) shares of Class B Common Stock, of which seventeen
million two hundred ninety-three thousand five hundred and seventy-eight
(17,293,578) shares are issued and outstanding; and (c) ten million
(10,000,000) shares of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. One million nine hundred thousand
(1,900,000) shares of Class A Common Stock have been reserved for issuance
upon the exercise of Plan Options granted under the Company Stock Option
Plans, of which seven hundred forty-five thousand eight hundred and thirty-
four (745,834) shares are issuable upon the exercise of Plan Options
outstanding under the Company Stock Option Plans as of the date hereof. The
Phantom Options assume the issuance of twenty thousand (20,000) shares of
Class A Common Stock upon exercise thereof. One hundred sixty thousand
(160,000) shares of Class A Common Stock are reserved for issuance under the
Company's 1995 Employee Stock Purchase Plan and twenty-five thousand (25,000)
shares of Class A Common Stock are reserved for issuance under the Company's
1995 Non-Employee Director Stock Purchase Plan. Seventeen million two hundred
ninety-three thousand five hundred and seventy-eight (17,293,578) shares of
Class A Common Stock are reserved for purposes of effecting conversions of
Class B Common Stock into Class A Common Stock. Since December 31, 1996, no
shares of Class A Common Stock or Class B Common Stock have been issued,
except for shares of Class A Common Stock issued upon the exercise of options
granted under the Company's Stock Option Plans and shares of Class A Common
Stock issued pursuant to the Company's Stock Purchase Plan. Except as set
forth in Schedule 3.3, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in the Company or any Company
Subsidiary. Except as set forth in Schedule 3.3, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any material investment (in
the form of a loan, capital contribution or otherwise) in any other person.
All of the issued and outstanding shares of Class A Common Stock and Class B
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
Schedule 3.3, with respect to each Company Subsidiary that is a corporation,
all of the outstanding shares of capital stock of such Company Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in Schedule 3.3, with respect to each Company Subsidiary
that is a partnership, all of the partnership interests owned by the Company,
and with respect to each Company Subsidiary that is a corporation, all of the
outstanding shares of capital stock owned by the Company, are owned by the
Company free and clear of any liens, security interests, pledges, agreements,
options, rights, claims, charges or encumbrances (the "Encumbrances"). As of
the date hereof, the only
6
<PAGE>
outstanding indebtedness for borrowed money of the Company and the Company
Subsidiaries is as set forth in Schedule 3.3 and all such indebtedness is
prepayable in full without premium or penalty in accordance with its terms.
Section 3.4. Authority.
The Company has the necessary corporate power and authority to enter into
this Agreement and subject to obtaining any necessary stockholder approval of
the Merger, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the approval of this Agreement by the
stockholders of the Company in accordance with Delaware Law. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Acquiror and Merger Sub, constitutes
a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
Section 3.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations under this Agreement will
not, subject to compliance with the requirements set forth in Section 3.5(b)
below, (i) conflict with or violate the certificate or articles of
incorporation, bylaws, partnership agreement or other organizational document
of the Company or any Company Subsidiary, (ii) conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company or any Company Subsidiary or by which any of their
respective properties is bound or affected, (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which the
Company, any Company Subsidiary or any of their respective properties or
assets is bound or affected, or (iv) result in any material breach of or
constitute a material default (or an event which with notice or lapse of time
or both would become a material default) or give rise to any material rights
to other parties under any Material Contract described in Section 3.12(a)(i),
except, in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that in the
aggregate (A) would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and (B) would not
have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), except (i) for (A) applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), state
takeover laws, the exchange on which the Company's securities are traded, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Communications Act of 1934, as amended, together with the rules,
regulations and published decisions of the FCC (collectively, the
"Communications Act"), (B) applicable requirements, if any, of the consents,
approvals, authorizations or permits described in Schedule 3.5, and (C) filing
and recordation of appropriate merger documents as required by Delaware Law
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not in the aggregate
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, and would not in the aggregate have a
Company Material Adverse Effect.
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Section 3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements and other documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since March 21, 1995, and has heretofore made available to Acquiror, in the
form filed with the SEC since such date, together with any amendments thereto,
its (i) Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q,
(iii) all proxy statements relating to meetings of stockholders (whether
annual or special), (iv) all reports on Form 8-K, and (v) all other reports or
registration statements filed by the Company (collectively, the "Company SEC
Reports"). As of their respective filing dates the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act")
and (ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Company SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of the Company and the
Company Subsidiaries as at the respective dates thereof and the consolidated
results of operations and cash flows of the Company and the Company
Subsidiaries for the periods indicated in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
Section 3.7. Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Reports filed prior to the date of
this Agreement or as set forth in Schedule 3.7, since December 31, 1996, the
Company and the Company Subsidiaries have not incurred any material liability,
except in the ordinary course of the businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of the Company or any of the Company
Subsidiaries or the occurrence of any other event, which has had, or is
reasonably likely to have, a Company Material Adverse Effect, and the Company
and the Company Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
Section 3.8. Absence of Litigation.
Except as set forth in Schedule 3.8, as of the date hereof there are (a) no
claims, actions, suits, investigations, or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of the Company
Subsidiaries before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, that (i) if
adversely determined would individually involve the payment of more than One
Hundred Thousand Dollars ($100,000) by the Company or any Company Subsidiary,
(ii) if adversely determined would individually or in the aggregate be
reasonably likely to have a Company Material Adverse Effect, (iii) challenge
or seek to prevent, enjoin, alter or materially delay the transactions
contemplated hereby, or (iv) seek material injunctive relief against the
Company or any Company Subsidiary, and (b) no material judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator outstanding
against the Company or any Company Subsidiary.
Section 3.9. Licenses and Permits; Compliance with Laws.
The Company and the Company Subsidiaries hold all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are
in full force and effect) from all Governmental Entities (collectively, the
"Permits") necessary for the Company and the Company Subsidiaries to own,
lease and operate their respective properties and to carry on their respective
businesses as now being conducted, except for the Permits for which the
failure to obtain would not have a Company Material Adverse Effect. The
businesses of the Company and the Company Subsidiaries are not being conducted
in violation of any applicable law, statute, ordinance, regulation, judgment,
Permits, order, decree, concession, grant or other authorization of any
Governmental Entity, except for violations that would not be reasonably likely
to have a Company Material Adverse Effect.
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Section 3.10. Taxes.
Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have prepared and filed on a timely basis with all appropriate
Governmental Entities all material returns in respect of taxes that they are
required to file on or prior to the Effective Time or by the date therefor
including extensions, and all such returns are correct and complete in all
material respects. Except as set forth in Schedule 3.10, the Company and the
Company Subsidiaries have paid in full all taxes due on or before the
Effective Time and, in the case of taxes accruing on or before the Effective
Time that are not due on or before the Effective Time, the Company has made
adequate provision in its books and records and financial statements for such
payment. Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have withheld from each payment made to any of its present or
former employees, officers and directors all amounts required by law to be
withheld and has, where required, remitted such amounts within the applicable
periods to the appropriate Governmental Entities. In addition, except as set
forth in Schedule 3.10, (a) there are no assessments of the Company or any
Company Subsidiary with respect to taxes that have been issued and are
outstanding; (b) no Governmental Entity has examined or audited the Company or
any Company Subsidiary in respect of taxes; (c) neither the Company nor any
Company Subsidiary has executed or filed any agreement extending the period of
assessment or collection of any taxes; and (d) neither the Company nor any
Company Subsidiary has received written notification from any Governmental
Entity of its intention to commence any audit or investigation. Except as set
forth in Schedule 3.10, neither the Company nor any Company Subsidiary is a
party to, is bound by or has any obligation under any tax sharing or tax
indemnification agreement, provision or arrangement, whether formal or
informal, and no power of attorney, which is currently in effect, has been
granted with respect to any matter relating to taxes of the Company or any
Company Subsidiary. Except as set forth in Schedule 3.10, neither the Company
nor any Company Subsidiary is presently required or will be required to
include any adjustment in taxable income under Section 481 of the Internal
Revenue Code of 1986, as amended (the "Code"), (or any similar provision of
the tax laws of any jurisdiction) as a result of any change in method of
accounting or otherwise. Except as set forth in Schedule 3.10, neither the
Company nor any Company Subsidiary has entered into any "intercompany
transaction" as to which any item of deferred gain or loss has not been
restored, and no "excess loss account" exists with respect to the stock of any
Company Subsidiary, as those terms are defined in the Treasury Regulations
issued under Section 1504 of the Code. For the purpose of this Agreement, the
term "tax" (including, with correlative meaning, the terms "taxes" and
"taxable") shall include except where the context otherwise requires, all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
Section 3.11. Intellectual Property.
Except as set forth in Schedule 3.11, the Company or one of the Company
Subsidiaries owns or possesses all rights to use of the service marks,
copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes
and other similar intangible assets (the "Intellectual Property") maintained,
owned, used, held for use or otherwise held by the Company and the Company
Subsidiaries, and all of the rights, benefits and privileges associated
therewith material to the conduct of the business of the Company and the
Company Subsidiaries as currently conducted. To the knowledge of the Company,
neither the Company nor any Company Subsidiary is infringing upon any
Intellectual Property right or other legally protectable right of another. To
the knowledge of the Company, no person is materially infringing upon any
Intellectual Property right of the Company or any Company Subsidiary.
Section 3.12. Material Contracts.
(a) Schedule 3.12 sets forth a complete and correct list, as of the date of
this Agreement, of all agreements of the following type to which the Company
or a Company Subsidiary is a party or may be bound (collectively, the
"Material Contracts"): (i) agreements filed as an exhibit to the Company SEC
Reports and each agreement that would have been required to be filed as an
exhibit to the Company SEC Reports had such agreement been entered into as of
the date of filing any such SEC Report; (ii) employment, severance,
termination, consulting and retirement agreements; (iii) loan agreements,
indentures, letters of credit, mortgages, notes and other debt
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instruments evidencing indebtedness in excess of Five Hundred Thousand Dollars
($500,000); (iv) agreements that require aggregate future payments to or by
the Company or any Company Subsidiary of more than Five Hundred Thousand
Dollars ($500,000) (other than purchase orders and advertising sales contracts
entered into in the ordinary course of business); (v) agreements containing
any "change of control" provisions which, if triggered, would involve payments
by the Company or any Company Subsidiary in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or other material rights or obligations; (vi)
material agreements with any key employee, director, officer, or person known
to the Company to be a direct or indirect stockholder of the Company; (vii)
agreements prohibiting the Company or any Company Subsidiary from engaging or
competing in any line of business or limiting such competition; (viii) except
for the partnership agreements of the Company Subsidiaries, any joint venture,
partnership and similar agreements involving a sharing of profits; (ix)
acquisition or divestiture agreements relating to the (A) sale of assets or
stock of the Company or any Company Subsidiary (other than sales of inventory
in the ordinary course of business) or (B) the purchase of assets or stock of
any other person (other than the purchase of inventory in the ordinary course
of business and acquisitions of additional interests in Company Subsidiaries
involving payments by the Company of less than Five Hundred Thousand Dollars
($500,000) in the aggregate); (x) brokerage, finder's or financial advisory
agreements; (xi) guarantees of indebtedness for borrowed money of any person
(other than a Company Subsidiary); (xii) interconnection agreements and switch
sharing agreements; and (xiii) agreements under which the Company or any
Company Subsidiary manages a cellular system of any third party.
(b) Except as set forth in Schedule 3.12, all the Material Contracts are
valid and in full force and effect on the date hereof except to the extent
they have previously expired in accordance with their terms, and neither the
Company nor any Company Subsidiary has (or has any knowledge that any other
party thereto has) violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Material Contract, except
for defaults which would not in the aggregate reasonably be expected to have a
Company Material Adverse Effect. True and complete copies of all Material
Contracts have been delivered to Acquiror or made available for inspection.
Section 3.13. Employee Benefit Plans.
(a) Schedule 3.13 sets forth a list of all of the pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other material incentive plans, all other
material written employee programs, arrangements or agreements and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently adopted, maintained by, sponsored in whole or in part by,
or contributed to by the Company or for which the Company could incur a
liability or any entity required to be aggregated with the Company (each, a
"Commonly Controlled Entity") pursuant to Section 414 of the Code for the
benefit of present and former employees or directors of the Company and of
each Company Subsidiary or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity (collectively, the
"Benefit Plans"). Any of the Benefit Plans which is an "employee pension
benefit plan", as that term is defined in Section 3(2) of ERISA, is referred
to herein as an "ERISA Plan".
(b) Each of the Benefit Plans intended to be "qualified" within the meaning
of Section 401(a) or 501 of the Code has been determined by the Internal
Revenue Service to be so qualified and to the Company's knowledge, no
circumstances exist that could reasonably be expected by the Company to result
in the revocation of any such determination. Each of the Benefit Plans is in
compliance with their terms and the applicable terms of ERISA and the Code and
any other applicable laws, rules and regulations the breach or violation of
which could result in a material liability to the Company or any Commonly
Controlled Entity.
(c) No ERISA Plan which is a defined benefit pension plan has any "unfunded
current liability", as that term is defined in Section 302(d)(8)(A) of ERISA,
and the present fair market value of the assets of any such plan equals or
exceeds the plan's "benefit liabilities", as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
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(d) Except as disclosed in Schedule 3.13, no Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA (a
"Multiemployer Plan"). Neither the Company nor any Commonly Controlled Entity
has completely or partially withdrawn from any Multiemployer Plan. No
termination liability to the Pension Benefit Guaranty Corporation or
withdrawal liability to any Multiemployer Plan that is material in the
aggregate has been or is reasonably expected to be incurred with respect to
any Multiemployer Plan by the Company or any Commonly Controlled Entity.
(e) The Company has made available to Acquiror complete copies, as of the
date hereof, of all of the Benefit Plans that have been reduced to writing,
together with all documents establishing or constituting any related trust,
annuity contract, insurance contract or other funding instrument. The Company
has made available to Acquiror complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or written
materials concerning the Benefit Plans that are in the possession of the
Company as of the date hereof.
(f) To the Company's knowledge, except as set forth in Schedule 3.13 and
except for claims for benefits in the ordinary course of business, no claim,
lawsuit, arbitration or other action has been threatened or instituted against
any Benefit Plan.
(g) Except as set forth in Schedule 3.13, Schedule 7.9 or as otherwise
contemplated by the terms of this Agreement, the consummation of the
transactions contemplated by this Agreement will not give rise to any
liability, including, without limitation, liability for severance pay or
termination pay, or accelerate the time of payment or vesting or increase the
amount of compensation or benefits due to any employee, director or
stockholder of the Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Benefit Plan will fail to be deductible for federal income tax purposes by
virtue of Section 280G or 162(m) of the Code.
(h) Except as set forth in Schedule 3.13 or Schedule 7.9, neither the
Company nor any Company Subsidiary maintains, contributes to, or in any way
provides for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section
401(a) of the Code) to any current or future retiree or terminee.
(i) Neither the Company, any Company Subsidiary nor any Commonly Controlled
Entity has (or could incur) any liability under Title IV of ERISA.
Section 3.14. Properties; Assets.
Except as set forth in Schedule 3.14, the Company or one of the Company
Subsidiaries (a) has good and marketable title to all the properties and
assets reflected in the latest consolidated balance sheet of the Company dated
as of March 31, 1997 (the "Balance Sheet") as being owned by the Company or
one of the Company Subsidiaries (except properties sold or otherwise disposed
of since the date thereof in the ordinary course of business), or acquired
after the date thereof which are material to the Company's business on a
consolidated basis, free and clear of all Encumbrances except (i) statutory
liens securing payments not yet due, and (ii) such imperfections or
irregularities of title, claims, liens, charges, security interests or
encumbrances as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business
operations at such properties, and (b) is the lessee of all leasehold estates
which are material to its business on a consolidated basis and is in
possession of the properties purported to be leased thereunder, and to the
knowledge of the Company, each such lease is valid without default thereunder
by the lessee or lessor. The assets and properties of the Company and the
Company Subsidiaries, taken as a whole, are in good operating condition and
repair (ordinary wear and tear excepted), and constitute all of the assets and
properties which are required for the businesses and operations of the Company
and the Company Subsidiaries as presently conducted.
Section 3.15. Labor Relations.
Neither the Company nor any Company Subsidiary is a party to any collective
bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of the
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Company or any Company Subsidiary. Except as set forth in Schedule 3.15, the
Company and each Company Subsidiary is in compliance in all material respects
with all laws relating to the employment or the workplace, including, without
limitation, provisions relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration and
the withholding of income taxes, unemployment compensation, worker's
compensation, employee privacy and right to know and social security
contributions.
Section 3.16. Environmental Matters.
(a) Except as specifically set forth in those environmental reports
previously made available to Acquiror in the Company's due diligence data room
(the "Environmental Reports"), and except for matters which would not in the
aggregate have a Company Material Adverse Effect, (i) the Company and each
Company Subsidiary is in compliance with all applicable Environmental Laws (as
defined below) in effect on the date hereof; (ii) all Permits and other
governmental authorizations currently held by the Company and each Company
Subsidiary pursuant to the Environmental Laws are in full force and effect,
the Company and each Company Subsidiary is in compliance with all of the terms
of such Permits and authorizations, and no other Permits or authorizations are
required by the Company or any Company Subsidiary for the conduct of their
respective businesses on the date hereof; and (iii) the management, handling,
storage, transportation, treatment, and disposal by the Company and each
Company Subsidiary of any Hazardous Materials (as defined below) has been in
compliance with all applicable Environmental Laws. Neither the Company nor any
Company Subsidiary has received any written communication that alleges that
the Company or any Company Subsidiary is not in compliance in all material
respects with all applicable Environmental Laws in effect on the date hereof.
As of the date hereof, the Environmental Reports do not set forth any facts or
circumstances which have had or are reasonably likely to have a Company
Material Adverse Effect.
(b) Except as specifically set forth in the Environmental Reports, there is
no material Environmental Claim (as defined below) pending or, to the
knowledge of the Company, threatened against or involving the Company or any
of the Company Subsidiaries or against any person or entity whose liability
for any material Environmental Claim the Company or any of the Company
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) Except as specifically set forth in the Environmental Reports and except
for matters which would not in the aggregate have a Company Material Adverse
Effect, to the knowledge of the Company, there are no past or present actions
or activities by the Company or any Company Subsidiary including the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal
of any Hazardous Materials, that could reasonably form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any Company Subsidiary may have retained or assumed either
contractually or by operation of law.
(d) As used herein, these terms shall have the following meanings:
(i) "Environmental Claim" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person or governmental authority alleging
potential liability arising out of, based on or resulting from the
presence, or release or threatened release into the environment, of any
Hazardous Materials at any location owned or leased by the Company or any
Company Subsidiary or other circumstances forming the basis of any
violation or alleged violation of any Environmental Law.
(ii) "Environmental Laws" means all applicable foreign, federal, state
and local laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials or relating to management of asbestos in
buildings.
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(iii) "Hazardous Materials" means wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances
defined as "hazardous substances", "toxic substances", "radioactive
materials", or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws.
Section 3.17. Insurance.
Schedule 3.17 contains a list of all insurance policies of title, property,
fire, casualty, liability, life, workmen's compensation, libel and slander,
and other forms of insurance in force at the date thereof with respect to the
Company and the Company Subsidiaries. All such insurance policies: (a) insure
against such risks, and are in such amounts, as appropriate and reasonable
considering the Company and the Company Subsidiaries' properties, businesses
and operations; (b) are in full force and effect; and (c) are valid,
outstanding, and enforceable. Neither the Company nor any of the Company
Subsidiaries has received or given notice of cancellation with respect to any
of the material insurance policies.
Section 3.18. FCC Matters and Governmental Matters.
(a) The Company and the Company Subsidiaries hold all licenses, permits and
other authorizations issued by the FCC to the Company and the Company
Subsidiaries for the operation of their respective businesses (the "FCC
Licenses") as set forth in Schedule 3.18. The FCC Licenses constitute all of
the licenses, permits and authorizations from the FCC that are required for
the operations and businesses of the Company and the Company Subsidiaries as
they are now operated, except where the FCC has not issued a written microwave
authorization. Without limiting the foregoing, the Company and the Company
Subsidiaries have received all necessary authorizations from the Federal
Aviation Administration ("FAA") for all existing towers that are part of the
cellular systems operated by the Company and the Company Subsidiaries and for
any facilities the construction of which have been approved by the FCC or of
which applications or notifications have been filed for such approval.
(b) Schedule 3.18 sets forth each application and notification that the
Company and the Company Subsidiaries have pending before the FCC and sets
forth the expiration date for each of the cellular FCC Licenses. The Company
and the Company Subsidiaries have provided a copy to Acquiror of each of the
FCC Licenses and the applications and notifications listed in Schedule 3.18,
except where the FCC has not issued a written microwave authorization.
(c) The FCC Licenses are valid and in full force and effect, unimpaired by
any condition or restriction or any act or omission by the Company or any of
the Company Subsidiaries which would reasonably be likely to have a Company
Material Adverse Effect. Except as set forth in Schedule 3.18, there are no
modifications, amendments, applications, revocations, or other proceedings, or
complaints pending or, to the knowledge of the Company, threatened, with
respect to the FCC Licenses (other than proceedings that apply to the cellular
industry generally). All fees due and payable to the FCC have been paid and no
event has occurred which, with or without the giving of notice or lapse of
time or both, would constitute grounds for revocation or modification of the
FCC Licenses.
(d) All material reports required by the Communications Act or required to
be filed with the FCC by the Company and the Company Subsidiaries have been
timely filed and are accurate and complete in all material respects. All
material reports required to be filed by the Company and the Company
Subsidiaries with all other governmental or administrative authorities,
federal, state and local, have been timely filed and are accurate and complete
in all material respects.
(e) Except where a lack of compliance would not have a Company Material
Adverse Effect, the Company and the Company Subsidiaries are in compliance
with, and their cellular systems have been operated in compliance with, the
Communications Act and the rules, regulations, policies and orders of the
relevant state public utilities commissions and the FAA, including, without
limitation, the FCC's time and coverage requirements of 47 C.F.R. (S)(S)
22.142, 22.911, 22.912 and 22.946 (the "Statutes"). The Company and the
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Company Subsidiaries have in operation validly licensed and adequate cellular
base stations required to provide 32 dBu contour coverage, as calculated under
the formula prescribed by the FCC in 47 C.F.R. (S) 22.911, to all areas of
their cellular markets except for coverage gaps that are less than 50
contiguous square miles in size. Except as set forth in Schedule 3.10 and
3.18, the Company and the Company Subsidiaries have not received any written
notice to the effect, or otherwise been advised in writing, that they are not
in compliance with any Statutes and do not have any reason to anticipate that
any presently existing circumstances are reasonably likely to result in
violations of any Statutes.
(f) Without limiting the generality of the foregoing, except as set forth in
Schedule 3.8, no adverse finding has been made, no consent decree entered, no
adverse action has been approved or taken by the FCC or any court or other
administrative body, and no admission of liability has been made with respect
to the Company or any of the Company Subsidiaries or any of the Company's
stockholders or any management employee of the Company or the Company
Subsidiaries concerning any civil or criminal suit, action or proceeding
brought under the provision of any federal, state, territorial or local law
relating to any of the following: any felony; unlawful restraint of trade or
monopoly; unlawful combination; contract or agreement in restraint of trade;
the use of unfair methods of competition; fraud; unfair labor practice; or
discrimination.
(g) Neither the Company nor any of the Company Subsidiaries has engaged in
any course of conduct that could reasonably be expected to impair the ability
of Merger Sub or its subsidiaries to be the holder of the FCC Licenses or is
aware of any reason why the FCC Licenses might not be renewed in the ordinary
course, why any of the FCC Licenses might be revoked, or why any pending
applications or notifications might not be approved.
Section 3.19. Board Approval; Vote Required.
The Board of Directors of the Company has determined that the transactions
contemplated by this Agreement are in the best interests of the Company and
its stockholders and has resolved to recommend to such stockholders that they
vote in favor thereof. The affirmative vote of a majority of the votes
entitled to be cast by the holders of outstanding shares of the Class A Common
Stock and Class B Common Stock (voting as a single class) is the only vote of
any class or series of capital stock of the Company necessary to approve the
transactions contemplated under this Agreement and the Merger.
Section 3.20. Opinion of Financial Advisor.
The Company's Board of Directors has received the opinion of Goldman, Sachs
& Co. that the consideration to be received in the Merger by the stockholders
of the Company is fair to such stockholders from a financial point of view, a
written copy of which opinion will be provided to Acquiror when received by
the Company, and such opinion has not been withdrawn or modified in any
material respect.
Section 3.21. Brokers.
Except for Goldman, Sachs & Co., no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE IV
Representations and Warranties of Merger Sub
Acquiror and Merger Sub jointly and severally represent and warrant to the
Company as follows:
Section 4.1. Organization and Qualification.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred
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in connection with its incorporation or organization and the transactions
contemplated by this Agreement, Merger Sub has not incurred, directly or
indirectly, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person.
Section 4.2. Certificate of Incorporation and Bylaws.
Merger Sub has heretofore made available to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Merger Sub,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Merger Sub is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
Section 4.3. Authority.
Merger Sub has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery by the
Company and Acquiror, constitutes a legal, valid and binding obligation of
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
Section 4.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Merger Sub do not, and
the performance by Merger Sub of its obligations under this Agreement will
not, subject to compliance with the requirements set forth in Section 4.4(b)
below, (i) conflict with or violate the certificate of incorporation or bylaws
of Merger Sub, (ii) conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree applicable to Merger Sub or by
which any of its properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the properties or assets of Merger Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Merger
Sub is a party or by which Merger Sub or any of its properties or assets is
bound or affected, except, in the case of clauses (ii) and (iii) above for any
such conflicts, violations, breaches, defaults or other alterations or
occurrences that would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Merger Sub from performing its
obligations under this Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub does not, and
the performance of this Agreement by Merger Sub will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of
the Exchange Act, state takeover laws, exchanges on which Acquiror's
securities are traded, the HSR Act and the Communications Act, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 4.4, and (C) filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or delay consummation of the Merger in any
material respect.
Section 4.5. Vote Required.
The affirmative vote of Acquiror, the sole stockholder of Merger Sub, is the
only vote of the holders of any class or series of Merger Sub capital stock
necessary to approve any of the transactions contemplated hereby.
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ARTICLE V
Representations and Warranties of Acquiror
Acquiror represents and warrants to the Company as follows:
Section 5.1. Organization and Qualification; Subsidiaries.
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation. Acquiror is duly
qualified to conduct its business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased
or the nature of its activities makes such qualification necessary, except for
such failure which would not have an Acquiror Material Adverse Effect (as
defined below). Acquiror has the requisite power and authority and any
necessary governmental authority, franchise, license or permit to own,
operate, lease and otherwise to hold and operate its assets and properties and
to carry on the business as now being conducted, except for such failure which
would not have an Acquiror Material Adverse Effect. As used herein, the term
"Acquiror Material Adverse Effect" means any material adverse effect on the
business, assets, financial condition or results of operations of Acquiror and
its subsidiaries (collectively, the "Acquiror Subsidiaries") taken as a whole.
Section 5.2. Organizational Documents.
Acquiror has heretofore made available to the Company a complete and correct
copy of the certificate of incorporation and bylaws of Acquiror, each as
amended to date. Such certificate of incorporation and bylaws are in full
force and effect. Acquiror is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
Section 5.3. Authority.
Acquiror has the necessary power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Acquiror
and the consummation by Acquiror of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no
other proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Acquiror and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Acquiror, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
Section 5.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror do not, and the
performance by Acquiror of its obligations under this Agreement will not,
subject to compliance with the requirements set forth in Section 5.4(b) below,
(i) conflict with or violate the certificate of incorporation or bylaws of
Acquiror, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to Acquiror or by which any
of its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of Acquiror pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror is a party or by
which Acquiror or any of its properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Acquiror from performing its obligations under this
Agreement in any material respect, and would not have an Acquiror Material
Adverse Effect.
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(b) The execution and delivery of this Agreement by Acquiror does not, and
the performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of
the Exchange Act, state takeover laws, exchanges on which Acquiror's
securities are traded, the HSR Act and the Communications Act, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 5.4, and (C) filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Acquiror from performing its
obligations under this Agreement in any material respect, and would not have
an Acquiror Material Adverse Effect.
Section 5.5. Vote Required.
No vote of the stockholders of Acquiror is necessary to approve any of the
transactions contemplated hereby.
Section 5.6. Financing.
Acquiror will have available on the Effective Time sufficient funds to
consummate the Merger and to make all the payments necessary to consummate the
transactions contemplated hereby, including, without limitation, payments
under Article II hereof for the Common Stock, Options and Dissenting Shares,
and payments necessary to satisfy all amounts outstanding as of the Closing
Date under the Company's credit facilities described on Schedule 3.3 hereto.
Section 5.7. Qualification of Acquiror.
Acquiror is and pending the Effective Time will be legally, technically,
financially and otherwise qualified under the Communications Act and all
rules, regulations and policies of the FCC to acquire, own and operate the
assets and business of the Company and the Company Subsidiaries. There are no
facts or proceedings which would reasonably be expected to disqualify Acquiror
under the Communications Act or otherwise from acquiring or operating any of
the assets and business of the Company and the Company Subsidiaries or would
cause the FCC not to approve the FCC Application (as defined in Section
7.5(a)). Acquiror has no knowledge of any fact or circumstance relating to
Acquiror or any of its affiliates that would reasonably be expected to (a)
cause the filing of any objection to the FCC Application, or (b) lead to a
delay in the processing by the FCC of the FCC Application. No waiver of any
FCC rule or policy is necessary to be obtained for the approval of the FCC
Application, nor will processing pursuant to any exception or rule of general
applicability be requested or required in connection with the consummation of
the transactions herein.
Section 5.8. Absence of Litigation.
Except as set forth in Schedule 5.8, there are (a) no claims, actions,
suits, investigations, or proceedings pending or, to Acquiror's knowledge,
threatened against Acquiror or any of its properties or assets before any
court, administrative, governmental, arbitral, mediation or regulatory
authority or body, domestic or foreign, that challenge or seek to prevent,
enjoin, alter or materially delay the transactions contemplated hereby, and
(b) no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against Acquiror or any of its properties or assets
that would prevent or materially delay the transactions contemplated hereby.
Section 5.9. Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
Section 5.10. SEC Filings; Financial Statements.
(a) Acquiror has filed all forms, reports, statements and other documents
required to be filed with the SEC since December 31, 1996, and has heretofore
made available to the Company, in the form filed with the SEC
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since such date, together with any amendments thereto, its (i) Annual Reports
on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy
statements relating to meetings of stockholders (whether annual or special),
(iv) all reports on Form 8-K, and (v) all other reports or registration
statements filed by Acquiror (collectively, the "Acquiror SEC Reports"). As of
their respective filing dates the Acquiror SEC Reports (i) complied as to form
in all material respects with the requirements of the Exchange Act and the
Securities Act and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Acquiror SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Acquiror and Acquiror
Subsidiaries as at the respective dates thereof and the consolidated results
of operations and cash flows of Acquiror and Acquiror Subsidiaries for the
periods indicated in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be noted therein) and subject in the case of interim financial statements to
normal year-end adjustments.
Section 5.11. Absence of Certain Changes or Events.
Except as disclosed in the Acquiror SEC Reports filed prior to the date of
this Agreement or as set forth in Schedule 5.11, since March 31, 1997,
Acquiror and Acquiror Subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of Acquiror or any of Acquiror
Subsidiaries, which has had, or is reasonably likely to have, an Acquiror
Material Adverse Effect, and Acquiror and Acquiror Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices. The representations and warranties contained in this Section 5.11
shall be deemed to speak only as of the date hereof.
ARTICLE VI
Covenants
Section 6.1. Affirmative Covenants of the Company.
The Company hereby covenants and agrees that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or consented to in
writing by Acquiror, the Company shall, and shall cause each Company
Subsidiary to, (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its reasonable efforts to preserve
substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective principal officers and key
employees and maintain its relationship with its respective principal
customers and suppliers; (c) use its reasonable efforts to maintain and keep
its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted; and (d) use its reasonable efforts to keep in
full force and effect insurance comparable in amount and scope of coverage to
that currently maintained; provided, however, that in the event the Company or
any of the Company Subsidiaries deems it necessary to take certain actions
that would otherwise be prohibited by clauses (a)-(d) of this Section 6.1, the
Company shall consult with Acquiror and Acquiror shall consider in good faith
the Company's request to take such action and not unreasonably withhold or
delay its consent for such action.
Section 6.2. Negative Covenants of the Company.
Except as expressly contemplated by this Agreement and except as set forth
in Schedule 6.2, or otherwise consented to in writing by Acquiror, from the
date hereof until the Effective Time, the Company shall not, and shall cause
each Company Subsidiary not to, do any of the following:
(a) (i) increase the compensation payable to or to become payable to any
of its directors, executive officers or employees, except for increases in
salary, wages or bonuses payable or to become payable in the ordinary
course of business and consistent with past practice; (ii) grant any
severance or termination pay
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(other than pursuant to existing severance arrangements or policies as in
effect on the date of this Agreement) to, or enter into or modify any
employment or severance agreement with, any of its directors, officers or
employees; or (iii) adopt or amend any employee benefit plan or
arrangement, except as may be required by applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any share of its
capital stock or any securities or obligations convertible into or
exchangeable for any share of its capital stock, or any options, warrants
or conversion or other rights to acquire any shares of its capital stock or
any such securities or obligations (except in connection with the exercise
of outstanding Options referred to in Schedule 3.3 in accordance with their
terms); (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or
in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale (including the grant of any
Encumbrances) of, any shares of any class of its capital stock (including
shares held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares (including any phantom options or stock
appreciation rights), or any rights, warrants or options to acquire, any
such shares (except for the issuance of shares upon the exercise of
outstanding Options and the issuance of shares under the Company Stock
Purchase Plans); or (ii) amend or otherwise modify the terms of any such
rights, warrants or options in a manner inconsistent with the provisions of
this Agreement or the effect of which shall be to make such terms more
favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division (other than a wholly-owned
Subsidiary) thereof, or otherwise acquire or agree to acquire any assets of
any other person (other than the purchase of assets in the ordinary course
of business and consistent with past practice), or make or commit to make
any capital expenditures other than capital expenditures in the ordinary
course of business consistent with past practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its material assets except for the grant of
purchase money security interests not to exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate and dispositions in the ordinary course
of business and consistent with past practice;
(g) propose or adopt any amendments to its certificate of incorporation
or, as to its bylaws or partnership agreement, as the case may be, any
amendments that would have an adverse impact on the consummation of the
transactions contemplated by this Agreement or would be adverse to
Acquiror's interests;
(h) (i) change any of its methods of accounting in effect at January 1,
1997, or (ii) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes (except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed Five Hundred Thousand
Dollars ($500,000), or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1996, except, in the case of clause (i) or clause (ii), as may
be required by law or generally accepted accounting principles;
(i) incur any obligation for borrowed money, whether or not evidenced by
a note, bond, debenture or similar instrument, other than (i) purchase
money indebtedness not to exceed Five Hundred Thousand Dollars ($500,000)
in the aggregate, (ii) indebtedness incurred in the ordinary course of
business under the existing loan agreements described on Schedule 3.3
hereto, and (iii) capitalized leases not to exceed One Million Dollars
($1,000,000) in the aggregate;
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(j) without the written consent of Acquiror (which consent shall not be
unreasonably withheld, delayed or conditioned), enter into or modify in any
material respect any agreement which, if in effect as of the date hereof,
would have been required to be disclosed on Schedule 3.12 as a Material
Contract; or
(k) agree in writing or otherwise to do any of the foregoing.
Section 6.3. Negative Covenants of Acquiror.
From the date hereof until the Effective Time, Acquiror shall not (a)
declare or pay any dividend on or make any other distribution of cash or
property in respect of, outstanding shares of its capital stock; or (b)
redeem, repurchase or otherwise reacquire any shares of its capital stock or
any securities or obligations convertible into or exchangeable for any shares
of its capital stock.
Section 6.4. Control of Operations.
Nothing contained in this Agreement shall give Acquiror or Merger Sub,
directly or indirectly, except as expressly provided in this Agreement, the
right to control or direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, each of the Company and Acquiror shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its respective operations.
ARTICLE VII
Additional Agreements
Section 7.1. Access and Information.
From the date hereof to the Effective Time, the Company shall, and shall
cause the Company Subsidiaries to, afford to Acquiror and its officers,
employees, accountants, consultants, legal counsel, representatives of current
and prospective sources of financing for the Merger and other representatives
of Acquiror (collectively, the "Acquiror Representatives"), reasonable access
during normal business hours to the properties, executive personnel and all
information concerning the business, properties, contracts, records and
personnel of the Company and the Company Subsidiaries as Acquiror may
reasonably request. The Company further agrees to reasonably cooperate with
Acquiror in connection with Acquiror's obtaining financing for this
transaction (including making appropriate officers of the Company available on
a reasonable basis for road show presentations).
Section 7.2. Confidentiality.
Acquiror acknowledges and agrees that all information received from or on
behalf of the Company or any of the Company Subsidiaries in connection with
the Merger shall be deemed received pursuant to the confidentiality agreement,
dated as of May 21, 1997, between the Company and Acquiror (the
"Confidentiality Agreement") and Acquiror shall, and shall cause the Acquiror
Representatives to comply with the provisions of the Confidentiality Agreement
with respect to such information and the provisions of the Confidentiality
Agreement are hereby incorporated herein by reference with the same effect as
if fully set forth herein.
Section 7.3. Stockholder Approval.
The Company shall, promptly after the date of this Agreement, take all
action necessary in accordance with Delaware Law and its certificate of
incorporation and bylaws to convene a meeting of the Company's stockholders
(the "Stockholders' Meeting"), to approve and adopt this Agreement and the
Merger. The Company shall use its best efforts to solicit from stockholders of
the Company proxies in favor of the approval and adoption of this Agreement
and the Merger and to take all other actions reasonably necessary or in
Acquiror's reasonable judgment advisable to secure such vote as promptly as
practicable, unless otherwise required by applicable fiduciary duties of the
directors of the Company, as determined by such directors in good faith after
consultation with independent legal counsel.
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Section 7.4. Proxy Statement.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Company shall prepare and file with the SEC a proxy statement
in connection with the matters to be considered at the Stockholders' Meeting
(the "Proxy Statement"). The Company shall use its best efforts to cause the
Proxy Statement to be "cleared" by the SEC for mailing to the stockholders of
the Company as promptly as practicable and shall mail the Proxy Statement to
its stockholders as promptly as practicable thereafter. Acquiror shall furnish
all information concerning it and the holders of its capital stock as the
Company may reasonably request in connection with such actions. The Proxy
Statement shall include the recommendation of the Company's Board of Directors
in favor of approval and adoption of this Agreement and the Merger, unless
otherwise required by applicable fiduciary duties of the directors of the
Company, as determined by such directors in good faith after consultation with
independent legal counsel. Acquiror shall have the right to review the Proxy
Statement before it is filed with the SEC.
(b) The information supplied by Acquiror for inclusion in the Proxy
Statement shall not, at the date the Proxy Statement (or any supplement
thereto) is first mailed by stockholders or at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. If at any time prior to the Stockholders' Meeting any
event or circumstance relating to Acquiror or any of its affiliates, or its or
their respective officers or directors, should be discovered by Acquiror that
should be set forth in a supplement to the Proxy Statement, Acquiror shall
promptly inform the Company.
(c) All information contained in the Proxy Statement (other than information
provided by Acquiror for inclusion therein) shall not, at the date the Proxy
Statement (or any supplement thereto) is first mailed to stockholders or at
the time of the Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior
to the Stockholders' Meeting any event or circumstance relating to the Company
or any of the Company Subsidiaries, or to its or their respective officers or
directors, should be discovered by the Company that should be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform Acquiror.
All documents that the Company is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form
and substance in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder.
Section 7.5. FCC Application.
(a) As promptly as practicable after the execution and delivery of this
Agreement, Acquiror, Merger Sub and the Company shall prepare all appropriate
applications for FCC consent, and such other documents as may be required,
with respect to the transfer of control of the Company to Acquiror
(collectively, the "FCC Application"). Not later than the fifth (5th) business
day following execution and delivery of this Agreement, Acquiror and Merger
Sub shall deliver to the Company their respective completed portions of the
FCC Application. Not later than the tenth (10th) business day following the
execution and delivery of this Agreement, the Company shall file, or cause to
be filed, the FCC Application. Acquiror, Merger Sub and the Company shall
prosecute the FCC Application in good faith and with due diligence in order to
obtain such FCC consent as expeditiously as practicable. If the Closing shall
not have occurred for any reason within the initial effective period of the
granting of approval by the FCC of the FCC Application, and neither Acquiror
nor the Company shall have terminated this Agreement pursuant to Section 9.1,
Acquiror and the Company shall jointly request one or more extensions of the
effective period of such grant. No party hereto shall knowingly take, or fail
to take, any action the intent or reasonably anticipated consequence of which
action or failure to act would be to cause the FCC not to grant approval of
the FCC Application.
(b) Acquiror and the Company shall each pay one-half ( 1/2) of any FCC fees
that may be payable in connection with the filing or granting of approval of
the FCC Application. Acquiror and the Company shall each
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oppose any request for reconsideration or judicial review of the granting of
approval of the FCC Application. The Company shall pay any cost incurred in
connection with complying with the FCC notice and advertisement requirements
in connection with the transfer of control of the Company.
Section 7.6. Further Action; Best Efforts.
(a) Each of the parties shall use best efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable laws or otherwise to
consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable, including, without limitation, using its best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and parties to contracts
with the Company and Acquiror as are necessary for the transactions
contemplated herein. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
commercially reasonable efforts to take all such action.
(b) From the date of this Agreement until the Effective Time, each of the
parties shall promptly notify the other in writing of any pending or, to the
knowledge of such party, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Common Stock into the
Merger Consideration pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of
Acquiror to own or operate all or any portion of the business or assets of the
Company.
(c) The Company shall give prompt written notice to Acquiror, and Acquiror
and Merger Sub shall give prompt written notice to the Company, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Effective Time. Each party shall use
its best efforts to not take any action, or enter into any transaction, which
would cause any of its representations or warranties contained in this
Agreement to be untrue or result in a breach of any covenant made by it in
this Agreement.
Section 7.7. Public Announcements.
Acquiror and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement of Acquiror or the Company with any exchange on which the
securities of the Company or Acquiror are traded.
Section 7.8. Indemnification; Directors' and Officers' Insurance.
(a) The certificate of incorporation and bylaws of the Surviving Corporation
shall contain the provisions with respect to indemnification set forth in the
certificate of incorporation and bylaws of the Company on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnities under
the certificate of incorporation or bylaws of the Company in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by applicable law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company and the Company Subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of
Acquiror and the Surviving Corporation (which approval shall not be
unreasonably withheld), or otherwise in connection with, any claim, action,
suit, proceeding or investigation (a "Claim"), based in whole or in part on
the fact that such person is or was such a director, officer or employee and
arising out of actions or omissions occurring at or prior to the Effective
Time (including, without limitation,
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the transactions contemplated by this Agreement), in each case to the fullest
extent permitted under Delaware Law (and shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party
to the fullest extent permitted under Delaware Law, upon receipt from the
Indemnified Party to whom expenses are advanced of the undertaking to repay
such advances contemplated by Section 145(e) of Delaware Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain its
regularly engaged independent legal counsel as of the date of this Agreement,
or other independent legal counsel satisfactory to them provided that such
other counsel shall be reasonably acceptable to Acquiror and the Surviving
Corporation, (ii) the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) the Surviving Corporation will use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any Claim effected without its written consent, which consent shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 7.8, promptly upon learning of any such Claim, shall notify
the Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability
which the Surviving Corporation may have under this Section 7.8, except to the
extent such failure prejudices the Surviving Corporation), and shall deliver
to the Surviving Corporation the undertaking contemplated by Section 145(e) of
Delaware Law. The Indemnified Parties as a group may retain one law firm (in
addition to local counsel) to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct (as
reasonably determined by counsel to such Indemnified Parties) a conflict on
any significant issue between the position of any two or more of such
Indemnified Parties, in which event, an additional counsel as may be required
may be retained by such Indemnified Parties.
(d) Acquiror shall cause to be maintained in effect for not less than six
(6) years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the Effective Time;
provided, however, that (i) Acquiror may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the Indemnified Parties to the extent reasonably
available and (ii) Acquiror shall not be required to pay an annual premium for
such insurance in excess of three hundred percent (300%) of the last annual
premium paid prior to the date of this Agreement, but in such case shall
purchase as much coverage as possible for such amount.
(e) This Section 7.8 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Acquiror and Merger Sub and
the Surviving Corporation and their respective successors and assigns.
Acquiror hereby guarantees the Surviving Corporation's obligations pursuant to
this Section 7.8.
Section 7.9. Employee Benefits Matters.
(a) For a period of two (2) years after the Effective Time, Acquiror shall
cause the Surviving Corporation to provide employee benefits under plans,
programs and arrangements, which, in the aggregate, will provide benefits to
the employees of the Company and the Company Subsidiaries which are no less
favorable, in the aggregate, than those provided pursuant to the plans,
programs and arrangements of the Company in effect and disclosed to Acquiror
on the date hereof; provided, however, that nothing herein shall interfere
with the Surviving Corporation's right or obligation to make such changes to
such plans, programs or arrangements as are necessary to conform with
applicable law; provided, further, however, that with respect to any such
plan, program or arrangement that provides for the issuance of the Company's
Common Stock, or options or securities exercisable or convertible into the
Company's Common Stock, the Surviving Corporation shall be required to adopt
equity compensation programs providing for the issuance of common stock of
Acquiror to such employees.
(b) In furtherance of the provisions of Section 7.9(a), Acquiror shall cause
the Surviving Corporation to provide to those executives listed on Schedule
7.9 hereto with the employee benefits provided to each such
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<PAGE>
executive on the date hereof and for the time period set forth in the
Company's employment and/or severance agreements with such executives as set
forth on Schedule 7.9 hereto; provided, however, that notwithstanding the
foregoing, to the extent that any contributions under a qualified retirement
plan would be prohibited by applicable law, Acquiror shall cause the Surviving
Corporation to make cash payments from time to time to such executives equal
to the value of such contributions which can not be so made under applicable
law, as and when such contributions would have been made as noted on Schedule
7.9. The employee benefits provided to such executives on the date hereof
under the Company's employment and/or severance agreements with such
executives are detailed on Schedule 7.9 hereto.
(c) Acquiror acknowledges and agrees that prior to the Effective Time, the
Company will take all such actions as may be necessary to cause (i) all
participants to become fully vested in their benefits under the Company's
401(k) Plan, and (ii) employer contributions to be made with respect to
periods prior to the Effective Time to the Company's 401(k) Plan to the extent
that such contributions would be made if the participants were employed by the
Company on the last day of the calendar year in which the Closing occurs.
Acquiror will allow employees of PCI to continue to participate in the
Company's 401(k) Plan at least until the end of the calendar year in which the
Closing occurs.
(d) On or prior to the Effective Time, the Company shall pay a pro-rated
portion of the annual bonuses and gainshare that would have otherwise been
payable to the eligible employees of the Company after the end of the year,
such bonuses and gainshare to be consistent with the Company's 1997 Management
and Professional Bonus Plan and the Company's Gainshare Program, with past
practice, and the estimates contained in Schedule 7.9(d).
(e) Acquiror agrees that it will not allow the Surviving Corporation to
amend or terminate the Palmer Wireless, Inc. Change of Control Severance
Program for a period of one (1) year after the Effective Time.
(f) Prior to Closing, the Company shall make, or shall make accruals on its
financial statements for, all payments required to be made by the Company
under the terms of any Benefit Plan or by any law applicable to any Benefit
Plan with respect to all periods through the Closing Date.
(g) On or prior to the Effective Time, the Company shall take, or cause to
be taken, such actions as are reasonably necessary to:
(i) cause the Company to adopt the PCI plans providing medical, dental,
vision, prescription drug, flexible spending account, pre-tax premium
contribution, travel accident, accidental death and dismemberment, long
term disability, and life insurance benefits for the benefit of Company
employees;
(ii) add the Company as a contractholder under insurance contracts
providing insurance coverage, and administrative contracts relating to, for
one or more of the benefits listed in the immediately preceding paragraph
(i) above as well as workers compensation liability coverage and provide
that such contracts continue as to the Company after the Effective Time;
(iii) substitute the Company for PCI as the party to the Palmer
Communications Health Care Expense Fund which is a Code Section 501(c)(9)
trust used to fund certain of the benefits listed in paragraph (i) above
and any other trust or account which is used with respect to flexible
spending accounts or pre-tax premium contributions for Company employees;
and
(iv) except as provided in Section 7.9(c) hereof, cease participation and
coverage in the Company plans, trusts and insurance contracts referred to
in paragraphs (i) through (iii) above with respect to all individuals who
are not Company employees as of the Effective Time.
Section 7.10. HSR Act Matters.
Acquiror, Merger Sub and the Company (as may be required pursuant to the HSR
Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order
to comply with the HSR Act and, not later than fifteen (15) days after the
date
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hereof, together with the persons who are required to join in such filings,
shall file the same with the appropriate Governmental Entities. Acquiror,
Merger Sub and the Company shall promptly furnish all materials thereafter
required by any of the Governmental Entities having jurisdiction over such
filings, and shall take all reasonable actions and shall file and use best
efforts to have declared effective or approved all documents and notifications
with any such Governmental Entity, as may be required under the HSR Act or
other Federal antitrust laws for the consummation of the Merger and the other
transactions contemplated hereby.
Section 7.11. Negotiation With Others.
(a) Unless and until this Agreement shall have been terminated in accordance
with its terms, the Company shall not, through any officer, director,
employee, representative, agent or direct or indirect stockholder of the
Company or any Company Subsidiaries, directly or indirectly, encourage or
solicit any proposal that constitutes an Acquisition Proposal (as defined
below), engage in any discussions or negotiations or provide any information
to any person relating thereto or in furtherance thereof or accept any
Acquisition Proposal; provided, however, that nothing contained in this
Section 7.11 shall prohibit the Company, or its Board of Directors, from
making any disclosure to its stockholders that, in the judgment of its Board
of Directors in accordance with, and based upon, the advice of outside
counsel, is required under applicable law. For purposes of this Agreement,
"Acquisition Proposal" means any offer to acquire (or meaningful indication of
interest in the acquisition of) all or any substantial part of the business
and properties or capital stock of the Company or the Company Subsidiaries,
whether by merger, consolidation, sale of assets or stock, tender offer or
similar transaction or series of transactions involving the Company, the
Company Subsidiaries or their direct or indirect stockholders.
(b) Notwithstanding Section 7.11(a), the Board of Directors of the Company,
in the exercise of and as required by its fiduciary duties as determined in
good faith by the Board of Directors of the Company in accordance with and
based upon the advice of outside counsel, may (i) furnish information
(including, without limitation, confidential information) concerning the
Company to a third party who makes an unsolicited request for such information
for the purpose of making an Acquisition Proposal, provided that such third
party executes and delivers a confidentiality agreement substantially the same
as the Confidentiality Agreement, and (ii) engage in discussions or
negotiations with a third party who submits in writing an interest in making
an Acquisition Proposal that the Board of Directors believes, based on advice
of its financial advisors, is reasonably capable of being consummated and is
reasonably likely to be superior to the transactions contemplated by this
Agreement from a financial point of view to all stockholders of the Company,
provided, however, that in the case of clause (i) or (ii) hereof, the Company
shall promptly notify Acquiror in writing of such request for information or
Acquisition Proposal, providing reasonable details with respect thereto, and
shall keep Acquiror informed as to the status of any discussions or
negotiations referred to in clause (ii) above.
ARTICLE VIII
Closing Conditions
Section 8.1. Conditions to Obligations of Acquiror, Merger Sub and the
Company to Effect the Merger.
The respective obligations of Acquiror, Merger Sub and the Company to effect
the Merger and the other transactions contemplated herein shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company in accordance with applicable law.
(b) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in
any case which is in effect and which prevents or prohibits consummation of
the Merger or any other transactions contemplated in this Agreement;
provided, however, that the parties shall use their reasonable efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
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(c) HSR Act. Any waiting period with any extensions thereof under the HSR
Act shall have expired or been terminated.
(d) FCC Approval. All consents, waivers, approvals and authorizations
(the "FCC Transfer Approvals") required to be obtained, and all filings or
notices required to be made, by Acquiror, Merger Sub and the Company prior
to consummation of the transactions contemplated in this Agreement shall
have been obtained from, and made with, the FCC. Each of the FCC Transfer
Approvals shall have become a Final Order. For purposes of this Agreement,
"Final Order" shall mean an action by the FCC: (i) that is not reversed,
stayed, enjoined, set aside, annulled or suspended within the deadline, if
any, provided by applicable statute or regulation; (ii) with respect to
which no request for stay, motion or petition for reconsideration or
rehearing, application or request for review, or notice of appeal or other
judicial petition for review that is filed within such period is pending,
and (iii) as to which the deadlines, if any, for filing any such request,
motion, petition, application, appeal or notice, and for the entry of
orders staying, reconsidering or reviewing on the FCC's own motion have
expired. Notwithstanding anything to the contrary contained herein or
otherwise, Acquiror may, at is option by written notice to the Company: (i)
waive on behalf of the parties the requirement that each of the FCC
Transfer Approvals shall have become a Final Order; and (ii) acquire the
microwave licenses pursuant to special temporary authority granted to
Acquiror by the FCC.
Section 8.2. Additional Conditions to Obligations of Acquiror.
The obligations of Acquiror to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
the Company made in this Agreement shall be true and correct in all
material respects, on and as of the Effective Time with the same effect as
though such representations and warranties had been made on and as of the
Effective Time (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby), except for representations and warranties that speak as
of a specific date or time other than the Effective Time (which need only
be true and correct in all material respects as of such date or time).
Acquiror shall have received a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The agreements and covenants of the Company
required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
the Company to that effect.
(c) Legal Opinions. Acquiror shall have received (i) an opinion from
Hogan & Hartson L.L.P., counsel to the Company, in form and substance
reasonably satisfactory to Acquiror, and (ii) an opinion from the Company's
FCC counsel in substantially the form attached hereto as Exhibit A.
(d) Dissenting Shares. The Dissenting Shares shall constitute not greater
than ten percent (10%) of the shares of Class A Common Stock outstanding on
the Closing Date.
(e) No Company Material Adverse Effect. Since the date of this Agreement,
no Company Material Adverse Effect shall have occurred and be continuing.
Section 8.3. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the following
conditions any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Merger Sub made in this Agreement shall be true and correct in
all material respects, on and as of the Effective
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<PAGE>
Time with the same effect as though such representations and warranties had
been made on and as of the Effective Time (provided that any representation
or warranty contained herein that is qualified by a materiality standard
shall not be further qualified hereby), except for representations and
warranties that speak as of a specific date or time other than the
Effective Time (which need only be true and correct in all material
respects as of such date or time). The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to that effect.
(b) Agreements and Covenants. The agreements and covenants of Acquiror
and Merger Sub required to be performed on or before the Effective Time
shall have been performed in all material respects. The Company shall have
received a certificate of the Chief Executive Officer or Chief Financial
Officer of Acquiror to that effect.
(c) Legal Opinion. The Company shall have received an opinion from
Proskauer Rose Goetz & Mendelsohn LLP, counsel to Acquiror and Merger Sub,
in form and substance reasonably satisfactory to the Company.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1. Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of this Agreement and the Merger by the
stockholders of the Company:
(a) by mutual written consent of each of Acquiror and the Company;
(b) by Acquiror if the Company shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement
or any representation or warranty made by the Company shall have been
incorrect in any material respect when made or shall have since ceased to
be true and correct in any material respect, such that as a result of such
breach, failure or misrepresentation the conditions set forth in Section
8.2(a), 8.2(b) or 8.2(e) would not be satisfied, and such breach, failure
or misrepresentation is not cured within thirty (30) days after notice
thereof;
(c) by the Company if Acquiror or Merger Sub shall have breached, or
failed to comply with, in any material respect any of its obligations under
this Agreement or any representation or warranty made by Acquiror or Merger
Sub shall have been incorrect in any material respect when made or shall
have since ceased to be true and correct in any material respect, such that
as a result of such breach, failure or misrepresentation the conditions set
forth in Section 8.3(a) or 8.3(b) would not be satisfied, and such breach,
failure or misrepresentation is not cured within thirty (30) days after
notice thereof;
(d) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
(e) by either Acquiror or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Stockholders' Meeting and the Merger shall not have been
consummated within forty-five (45) days thereafter; and
(f) by either the Company or Acquiror if the merger shall not have been
consummated before December 31, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section
9.1(f) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date.
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Section 9.2. Effect of Termination.
Except as provided in Section 9.3 or Section 10.1, in the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void, there shall be no liability on the part of Acquiror,
Merger Sub or the Company or any of their respective officers or directors to
the other parties hereto and all rights and obligations of any party hereto
shall cease, except that nothing herein shall relieve any party for any breach
of this Agreement.
Section 9.3. Expenses; Fee.
(a) Except as otherwise expressly provided herein, all expenses incurred by
the parties hereto shall be borne solely by the party that has incurred such
expenses. All FCC annual regulatory fees which are due and payable prior to
Closing shall be paid by the Company prior to Closing.
(b) Without in any way limiting the Company's obligations under this
Agreement (including without limitation under Sections 1.1, 1.2, 1.6, 2.3,
6.1, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 and 7.11 hereof) or Acquiror's rights
under Section 10.7 hereof, the Company shall pay, or shall cause to be paid
to, Acquiror a Fee (the "Fee") of Fifteen Million Dollars ($15,000,000), if
this Agreement is (i) terminated either (A) by Acquiror under Section 9.1(b)
as a result of the Company's breach of its obligations under Sections 1.1,
1.2, 1.6, 2.3, 6.1, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 or 7.11, (B) by the
Company or Acquiror under Section 9.1(e) and (ii) either (A) an Alternative
Transaction (as defined below) has been publicly announced and has not been
withdrawn at the time of such termination (in which event the Fee shall be
paid simultaneously with such termination) or (B) an Alternative Transaction
is consummated on or prior to the date that is one (1) year after the date of
this Agreement (in which event the Fee shall be paid simultaneously with such
consummation); provided, however, that payment of such Fee shall be deemed to
satisfy in full all of the liabilities and obligations of the Company under
this Agreement. As used herein, an "Alternative Transaction" shall mean any
transaction or proposed transaction or related series of transactions
(including without limitation any merger, consolidation, sale of assets or
stock, tender offer or other transaction) providing for the receipt by the
Company and/or the holders of more than fifty percent (50%) of its Common
Stock of consideration equivalent to a value in excess of Seventeen Dollars
and Fifty Cents ($17.50) per share of Common Stock.
Section 9.4. Amendment.
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of this Agreement and
the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 9.5. Waiver.
At any time prior to the Effective Time, the parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE X
General Provisions
Section 10.1. Nonsurvival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement (and in any
certificate delivered in connection with the Closing) shall be deemed to be
conditions to the Merger and shall not survive the Effective Time or
termination of this Agreement, except for the agreements set forth in Articles
I (the Merger) and II
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(Conversion of Securities; Exchange of Certificates) and Sections 7.8
(Indemnification and Insurance) and 7.9 (Employee Benefits Matters), each of
which shall survive the Effective Time indefinitely, and Sections 7.2
(Confidentiality), 9.2 (Effect of Termination) and 9.3 (Expenses; Fee), each
of which shall survive termination of this Agreement indefinitely.
Section 10.2. Notices.
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Acquiror:
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Telecopier No.: (212) 397-3755
Attention: Robert Price
With a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Telecopier No.: (212) 969-2900
Attention: Peter G. Samuels, Esq.
(b) If to the Company:
Palmer Wireless, Inc.
12800 University Drive
Fort Myers, Florida 33014
Telecopier No.: (941) 433-8213
Attention: Pat Meehan, Esq.
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: David B.H. Martin, Jr., Esq.
Section 10.3. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" means with respect to any shares of Common Stock a
person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange Act) has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights,
29
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warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, (iii) which are beneficially
owned, directly or indirectly, by any other persons with whom such person
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of
any such shares or (iv) pursuant to Section 13(d) of the Exchange Act and
any rules or regulations promulgated thereunder;
(c) "business day" shall mean any day other than a day on which banks in
the State of Florida are authorized or obligated to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means, other than for purposes of the Communications Act,
the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee or executor,
by contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act).
Section 10.4. Headings.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 10.5. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 10.6. Entire Agreement.
This Agreement (together with the Exhibits, the Schedules and the other
documents delivered pursuant hereto) and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
Section 10.7. Specific Performance.
The transactions contemplated by this Agreement are unique. Accordingly,
each of the parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties hereto is entitled
to a decree of specific performance, provided such party is not in material
default hereunder.
Section 10.8. Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 10.9. Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement except for (a) the
Indemnified Parties
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under Section 7.8, (b) the rights of the holders of Common Stock to receive
the Merger Consideration payable in the Merger pursuant to Article II, and (c)
the rights of the individuals listed on Schedule 7.9 under Section 7.9.
Section 10.10. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Section 10.11. Counterparts.
This Agreement may be executed and delivered in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
In Witness Whereof, the parties hereto have caused this Agreement and Plan
of Merger to be executed and delivered as of the date first written above.
Price Communications Corporation
By: /s/ Robert Price
----------------------------------
Name: Robert Price
Title:President
Price Communications Cellular Merger
Corp.
By: /s/ Robert Price
----------------------------------
Name: Robert Price
Title:President
Palmer Wireless, Inc.
By: /s/ William J. Ryan
----------------------------------
William J. Ryan
President and Chief Executive
Officer
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Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
PRICE COMMUNICATIONS WIRELESS, INC.
FIRST: The name of the corporation is Price Communications
Wireless, Inc.
SECOND: The registered office of the corporation is to be located at
1013 Centre Road, Wilmington, Delaware, 19805-1297, New Castle County. The name
of its registered agent at that address is Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The corporation shall have the authority to issue 3,000
shares of common stock, par value $0.01 per share.
FIFTH: The name and mailing address of the sole incorporator are as
follows:
Lori S. Smith, Esq.
300 Park Avenue
New York, New York 10022
SIXTH: Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the corporation under the
provisions of (S)291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
corporation under the provisions of (S)279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
<PAGE>
sanctioned by the court to which the said application has been made, be binding
on all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of the corporation, as the case may be, and also on the
corporation.
SEVENTH: The corporation shall, to the fullest extent permitted
by law, as the same is now or may hereafter be in effect, indemnify each person
(including the heirs, executors, administrators and other personal
representatives of such person) against expenses including attorneys' fees,
judgments, fines and amounts paid in settlement, actually and reasonably
incurred by such person in connection with any threatened, pending or completed
suit, action or proceeding (whether civil, criminal, administrative or
investigative in nature or otherwise) in which such person may be involved by
reason of the fact that he or she is or was a director or officer of the
corporation or is or was serving any other incorporated or unincorporated
enterprise in such capacity at the request of the corporation.
EIGHT: Unless, and except to the extent that, the by-laws of
the corporation shall so require, the election of directors of the corporation
need not be by written ballot.
NINTH: The corporation hereby confers the power to adopt, amend
or repeal bylaws of the corporation upon the directors.
<PAGE>
Exhibit 3.2
BY-LAWS
OF
PRICE COMMUNICATIONS CELLULAR MERGER CORP.
1. MEETINGS OF STOCKHOLDERS.
------------------------
1.1 Annual Meeting. The annual meeting of stockholders shall be held
--------------
at a place and time as determined by the board of directors of the corporation
(the "Board") in its discretion.
1.2 Special Meetings. Special meetings of the stockholders may be
----------------
called by resolution of the Board or the president and shall be called by the
president or secretary upon the written request (stating the purpose or purposes
of the meeting) of a majority of the directors then in office or of the holders
of a majority of the outstanding shares entitled to vote. Only business related
to the purposes set forth in the notice of the meeting may be transacted at a
special meeting.
1.3 Place and Time of Meetings. Meetings of the stockholders may be
--------------------------
held in or outside Delaware at the place and time specified by the Board or the
officers or stockholders requesting the meeting.
1.4 Notice of Meetings: Waiver of Notice. Written notice of each
------------------------------------
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except the (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given, except
<PAGE>
when required under section 1.5 below or by law. Each notice of a meeting shall
be given personally or by mail, not fewer than 10 nor more than 60 days before
the meeting and shall state the time and place of the meeting, and, unless it is
the annual meeting, shall state at whose direction or request the meeting is
called and the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a stockholder at his address on the
corporation's records. The attendance of any stockholder at a meeting, without
protesting at the beginning of this meeting that the meeting is not lawfully
called or convened, shall constitute a waiver of notice by him.
1.5 Quorum. At any meeting of stockholders, the presence in person or by
------
proxy of the holders of a majority of the shares entitled to vote shall
constitute a quorum for the transaction of any business. In the absence of a
quorum, a majority in voting interest of those present or, if no stockholders
are present, any officer entitled to preside at or to act as secretary of the
meeting, may adjourn the meeting until a quorum is present. At any adjourned
meeting at which a quorum is present, any action may be taken that might have
been taken at the meeting as originally called. No notice of an adjourned
meeting need be given, if the time and place are announced at the meeting at
which the adjournment is taken, except that, if adjournment is for more than 30
days or if, after the adjournment, a new record date is fixed for the meeting,
notice of the adjourned meeting shall be given pursuant to section 1.4.
1.6 Voting: Proxies. Each stockholder of record shall be entitled to one
---------------
vote for each share registered in his name. Corporate action to be taken by
stockholder vote, other than the election of directors, shall be authorized by a
majority of the votes cast at a meeting of stockholders, except as otherwise
provided by law or by section 1.8. Directors shall be elected in
<PAGE>
the manner provided in section 2.1. Voting need not be by ballot, unless
requested by a majority of the stockholders entitled to vote at the meeting or
ordered by the chairman of the meeting. Each stockholder entitled to vote at any
meeting of stockholders or to express consent to or dissent from corporate
action in writing without a meeting may authorize another person to act for him
by proxy. No proxy shall be valid after three years from its date, unless it
provides otherwise.
1.7 List of Stockholders. Not fewer than 10 days prior to the date of
--------------------
any meeting of stockholders, the secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not fewer than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
the meeting is to be held, if that place shall have been specified in the notice
of the meeting, or (b) if not so specified, at the place where the meeting is to
be held. The list shall also be available for inspection by stockholders at the
time and place of the meeting.
1.8 Action by Consent Without a Meeting. Any action required or
-----------------------------------
permitted to be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not fewer than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon
<PAGE>
were present and voting. Prompt notice of the taking of any such action shall be
given to those stockholders who did not consent in writing.
2. BOARD OF DIRECTORS.
------------------
2.1 Number, Qualification, Election and Term of Directors. The business
-----------------------------------------------------
of the corporation shall be managed by the entire Board, which initially shall
consist of one director. The number of directors may be changed by resolution of
a majority of the Board or by the stockholders, but no decrease may shorten the
term of any incumbent director. Directors shall be elected at each annual
meeting of stockholders by a plurality of the votes cast and shall hold office
until the next annual meeting of stockholders and until the election and
qualification of their respective successors, subject to the provisions of
section 2.9. As used in these by-laws, the term "entire Board" means the total
number of directors the corporation would have, if there were no vacancies on
the Board.
2.2 Quorum and Manner of Acting. A majority of the entire Board shall
---------------------------
constitute a quorum for the transaction of business at any meeting, except as
provided in section 2.10. Action of the Board shall be authorized by the vote of
the majority of the directors present at the time of the vote, if there is a
quorum, unless otherwise provided by law or these by-laws. In the absence of a
quorum, a majority of the directors present may adjourn any meeting from time to
time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held in or outside
-----------------
Delaware.
<PAGE>
2.4 Annual and Regular Meetings. Annual meetings of the Board, for the
---------------------------
election of officers and consideration or other matters, shall be held either
(a) without notice immediately after the annual meeting of stockholders and at
the same place, or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in section 2.6. Regular meetings of the
Board may be held without notice at such times and places as the Board
determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.5 Special Meetings. Special meetings of the Board may be called by
----------------
the president or by a majority of the directors.
2.6 Notice of Meetings; Waiver of Notice. Notice of the time and
------------------------------------
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering or
telephoning or telegraphing it to him at least two days before the meeting.
Notice of a special meeting also shall state the purpose or purposes for which
the meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the transaction of any
business because the meeting was not lawfully called or convened. Notice of any
adjourned meeting need not be given, other than by announcement at the meeting
at which the adjournment is taken.
<PAGE>
2.7 Board or Committee Action Without a Meeting. Any action required
-------------------------------------------
or permitted to be taken by the Board or by any committee of the Board may be
taken without a meeting, if all the members of the Board or the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents by the members of the Board or the committee
shall be filed with the minutes of the proceedings of the Board or the
committee.
2.8 Participation in Board or Committee Meetings by Conference
----------------------------------------------------------
Telephone. Any or all members of the Board or any committee of the Board may
- ---------
participate in a meeting of the Board or the committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director may resign at
------------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any or all of the directors may be removed at
any time, either with or without cause, by vote of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one created by an
---------
increase in the number of directors, may be filled for the unexpired term by a
majority vote of the remaining directors, though less than a quorum.
2.11 Compensation. Directors shall receive such compensation as the
------------
Board determines, together with reimbursement of their reasonable expenses in
connection with the
<PAGE>
performance of their duties. A director also may be paid for serving the
corporation or its affiliates or subsidiaries in other capacities.
3. COMMITTEES.
----------
3.1 Executive Committee. The Board, by resolution adopted by a
-------------------
majority of the entire Board, may designate an executive committee of one or
more directors, which shall have all the powers and authority of the Board,
except as otherwise provided in the resolution, section 141(c) of the General
Corporation Law of Delaware or any other applicable law. The members of the
executive committee shall serve at the pleasure of the Board. All action of the
executive committee shall be reported to the Board at its next meeting.
3.2 Other Committees. The Board, by resolution adopted by a majority
----------------
of the entire Board, may designate other committees of one or more directors,
which shall serve at the Board's pleasure and have such powers and duties as the
Board determines.
3.3 Rules Applicable to Committees. The Board may designate one or
------------------------------
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In case of the absence
or disqualification of any member of a committee, the member or members present
at a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure and
shall meet as provided by those rules or by resolutions of the Board.
<PAGE>
4. OFFICERS.
--------
4.1 Number; Security. The executive officers of the corporation shall
----------------
be the president, one or more vice presidents (including an executive vice
president, if the Board so determines), a secretary and a treasurer. Any two or
more offices may be held by the same person. The board may require any officer,
agent or employee to give security for the faithful performance of his duties.
4.2 Election; Term of Office. The executive officers of the
------------------------
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of section 4.4.
4.3 Subordinate Officers. The Board may appoint subordinate officers
--------------------
(including assistant secretaries and assistant treasurers), agents or employees,
each of whom shall hold office for such period and have such powers and duties
as the Board determines. The Board may delegate to any executive officer or
committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may resign at
-----------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer elected or appointed by the Board or
appointed by an executive officer or by a committee may be removed by the Board
<PAGE>
either with or without cause, and in the case of an officer appointed by an
executive officer or by a committee, by the officer or committee that appointed
him or by the president.
4.5 Vacancies. A vacancy in any office may be filled for the unexpired
---------
term in the manner prescribed in sections 4.2 and 4.3 for election or
appointment to the office.
4.6 The President. The president shall be the chief executive officer
-------------
of the corporation. Subject to the control of the Board, he shall have general
supervision over the business of the corporation and shall have such other
powers and duties as presidents of corporations usually have or as the Board
assigns to him.
4.7 Vice President. Each vice president shall have such powers and
--------------
duties as the Board or the president assigns to him.
4.8 The Treasurer. The treasurer shall be the chief financial officer
-------------
of the corporation and shall be in charge of the corporation's books and
accounts. Subject to the control of the Board, he shall have such other powers
and duties as the Board or the president assigns to him.
4.9 The Secretary. The secretary shall be the secretary of, and keep
-------------
the minutes of, all meetings of the Board and the stockholders, shall be
responsible for giving notice of all meetings of stockholders and the Board, and
shall keep the seal and, when authorized by the Board, apply it to any
instrument requiring it. Subject to the control of the Board, he shall have such
powers and duties as the Board or the president assigns to him. In the absence
of the
<PAGE>
secretary from any meeting, the minutes shall be kept by the person appointed
for that purpose by the presiding officer.
4.10 Salaries. The Board may fix the officers' salaries, if any, or it
--------
may authorize the president to fix the salary of any other officer.
5. Shares
------
5.1 Certificates. The corporation's shares shall be represented by
------------
certificates in the form approved by the Board. Each certificate shall be
signed by the president or a vice president, and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer, and shall be
sealed with the corporation's seal or a facsimile of the seal. Any or all the
signatures on the certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the corporation's
---------
books, upon surrender of the certificate for the shares, properly endorsed. The
Board may require satisfactory surety before issuing a new certificate to
replace a certificate claimed to have been lost or destroyed.
5.3 Determination of Stockholders of Record. The Board may fix, in
---------------------------------------
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or fewer than 10 days
before the date of the meeting or more than 60 days before any other action.
<PAGE>
6. INDEMNIFICATION AND INSURANCE.
-----------------------------
6.1 Right to Indemnification. Each person who was or is a party or is
------------------------
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action or inaction in an
official capacity or in any other capacity while serving as director, officer,
employee or agent, shall be indemnified and held harmless by the corporation to
the fullest extent permitted by the General Corporation Law of Delaware, as
amended from time to time, against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and that indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his heirs, executors and
administrators; provided, however, that, except as provided in section 6.2, the
corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by that person, only if
that proceeding (or part thereof) was authorized by the Board. The right to
indemnification conferred in these by-laws shall be a contract right and shall
include the right to be paid by the corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of Delaware, as amended from time
to time,
<PAGE>
requires, the payment of such expenses incurred by a director or officer in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by that person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced, if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under these by-laws or
otherwise. The corporation may, by action of its Board, provide indemnification
to employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
6.2 Right of Claimant to Bring Suit. If a claim under
-------------------------------
section 6.1 is not paid in full by the corporation within 30 days after a
written claim has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant also shall be
entitled to be paid the expense of prosecuting that claim. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition, where
the required undertaking, if any, is required and has been tendered to the
corporation) that the claimant has failed to meet a standard of conduct that
makes it permissible under Delaware law for the corporation to indemnify the
claimant for the amount claimed. Neither the failure of the corporation
(including its Board, its independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is permissible in the circumstances because he
has met that standard of conduct, nor an actual determination by the corporation
(including its Board, its
<PAGE>
independent counsel or its stockholders) that the claimant has not met that
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has failed to meet that standard of conduct.
6.3 Non-Exclusivity of Rights. The right to indemnification and the
-----------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this section 6 shall not be exclusive of any other
right any person may have or hereafter acquire under any statute, provision of
the certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
6.4 Insurance. The corporation may maintain insurance, at its expense,
---------
to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against that expense,
liability or loss under Delaware law.
6.5 Expenses as a Witness. To the extent any director, officer,
---------------------
employee or agent of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in any
action, suit or proceeding, he shall be indemnified against all costs and
expense actually and reasonably incurred by him or on his behalf in connection
therewith.
6.6 Indemnity Agreements. The corporation may enter into agreement
--------------------
with any director, officer, employee or agent of the corporation providing for
indemnification to the fullest extent permitted by Delaware law.
<PAGE>
7. MISCELLANEOUS.
-------------
7.1 Seal. The Board shall adopt a corporate seal, which shall be in
----
the form of a circle and shall bear the corporation's name and the year and
state in which it was incorporated.
7.2 Fiscal Year. The Board may determine the corporation's fiscal
-----------
year.
7.3 Voting of Shares in Other Corporations. Shares in other
--------------------------------------
corporations held by the corporation may be represented and voted by an officer
of this corporation or by a proxy or proxies appointed by one of them. The
Board may, however, appoint some other person to vote the shares.
7.4 Amendments. By-laws may be amended, repealed or adopted by the
----------
Board in its discretion.
<PAGE>
Exhibit 4.1
================================================================================
PRICE COMMUNICATIONS WIRELESS, INC.,
Issuer,
and
BANK OF MONTREAL TRUST COMPANY,
Trustee
-------------------
INDENTURE
Dated as of July 10, 1997
-------------------
$175,000,000
11 3/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Incorporation by Reference of TIA.............................25
SECTION 1.03. Rules of Construction.........................................25
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating...............................................26
SECTION 2.02. Execution and Authentication..................................26
SECTION 2.03. Registrar and Paying Agent....................................27
SECTION 2.04. Paying Agent to Hold Assets in Trust..........................28
SECTION 2.05. Securityholder Lists..........................................29
SECTION 2.06. Transfer and Exchange.........................................29
SECTION 2.07. Replacement Securities........................................36
SECTION 2.08. Outstanding Securities........................................36
SECTION 2.09. Treasury Securities...........................................37
SECTION 2.10. Temporary Securities..........................................37
SECTION 2.11. Cancellation..................................................37
SECTION 2.12. Defaulted Interest............................................38
ARTICLE 3
REDEMPTION
SECTION 3.01. Redemption....................................................39
SECTION 3.02. Notices to Trustee............................................40
SECTION 3.03. Selection of Securities to Be Redeemed........................40
SECTION 3.04. Notice of Redemption..........................................41
SECTION 3.05. Effect of Notice of Redemption................................42
SECTION 3.06. Deposit of Redemption Price...................................42
SECTION 3.07. Securities Redeemed in Part...................................43
<PAGE>
PAGE
----
ARTICLE 4
COVENANTS
SECTION 4.01. Transactions Not Subject to Covenants.........................43
SECTION 4.02. Payment of Securities.........................................45
SECTION 4.03. Maintenance of Office or Agency...............................45
SECTION 4.04. Limitation on Restricted Payments.............................46
SECTION 4.05. Corporate Existence...........................................47
SECTION 4.06. Payment of Taxes and Other Claims.............................47
SECTION 4.07. Maintenance of Properties and Insurance.......................48
SECTION 4.08. Compliance Certificate; Notice of Default.....................48
SECTION 4.09. Reports.......................................................49
SECTION 4.10. Limitation on Status as Investment Company....................49
SECTION 4.11. Limitation on Transactions with Related Persons...............49
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness...........50
SECTION 4.13. Limitations on Restricting Subsidiary Dividends...............52
SECTION 4.14. Limitations on Layering of Indebtedness; Liens................53
SECTION 4.15. Limitation on Asset Sales and Sales of Subsidiary Stock.......54
SECTION 4.16. Waiver of Stay, Extension or Usury Laws.......................60
SECTION 4.17. Rule 144A Information Requirement.............................61
SECTION 4.18. Limitation on Lines of Business...............................61
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock..........61
SECTION 4.20. Deposit of Proceeds with Trustee Pending Consummation
of the Merger...............................................61
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01. Limitation on Merger, Sale or Consolidation...................62
SECTION 5.02. Successor Corporation Substituted.............................63
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.............................................63
SECTION 6.02. Acceleration of Maturity Date; Rescission and Annulment.......65
SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by
Trustee.....................................................67
SECTION 6.04. Trustee May File Proofs of Claim..............................67
ii
<PAGE>
PAGE
----
SECTION 6.05. Trustee May Enforce Claims Without Possession of Securities...68
SECTION 6.06. Priorities....................................................69
SECTION 6.07. Limitation on Suits...........................................69
SECTION 6.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest........................................70
SECTION 6.09. Rights and Remedies Cumulative................................70
SECTION 6.10. Delay or Omission Not Waiver..................................70
SECTION 6.11. Control by Holders............................................71
SECTION 6.12. Waiver of past Default........................................71
SECTION 6.13. Undertaking for Costs.........................................71
SECTION 6.14. Restoration of Rights and Remedies............................72
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.............................................72
SECTION 7.02. Rights of Trustee.............................................73
SECTION 7.03. Individual Rights of Trustee..................................75
SECTION 7.04. Trustee's Disclaimer..........................................75
SECTION 7.05. Notice of Default.............................................75
SECTION 7.06. Reports by Trustee to Holders.................................75
SECTION 7.07. Compensation and Indemnity....................................75
SECTION 7.08. Replacement of Trustee........................................77
SECTION 7.09. Successor Trustee by Merger, Etc..............................78
SECTION 7.10. Eligibility; Disqualification.................................78
SECTION 7.11. Preferential Collection of Claims Against Company.............78
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance......78
SECTION 8.02. Legal Defeasance and Discharge................................78
SECTION 8.03. Covenant Defeasance...........................................79
SECTION 8.04. Conditions to Legal or Covenant Defeasance....................79
SECTION 8.05. Deposited U.S. Legal Tender Equivalents and U.S.
Government Obligations to be Held in Trust; Other
Miscellaneous Provisions....................................81
SECTION 8.06. Repayment to the Company......................................81
iii
<PAGE>
PAGE
----
SECTION 8.07. Reinstatement.................................................82
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Supplemental Indentures Without Consent of Holders............82
SECTION 9.02. Amendments, Supplemental Indentures and Waivers with
Consent of Holders..........................................83
SECTION 9.03. Compliance with TIA...........................................85
SECTION 9.04. Revocation and Effect of Consents.............................85
SECTION 9.05. Notation on or Exchange of Securities.........................86
SECTION 9.06. Trustee to Sign Amendments, Etc...............................86
ARTICLE 10
COLLATERAL ACCOUNT AND RELEASES
SECTION 10.01. Collateral Account...........................................86
SECTION 10.02. Eligible Investments.........................................87
SECTION 10.03. Release of Collateral........................................88
ARTICLE 11
RIGHT TO REQUIRE REPURCHASE
SECTION 11.01. Repurchase of Securities at Option of the Holder Upon a
Change of Control..........................................88
ARTICLE 12
SUBORDINATION
SECTION 12.01. Securities Subordinated to Senior Indebtedness...............91
SECTION 12.02. No Payment on Securities in Certain Circumstances............92
SECTION 12.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.94
SECTION 12.04. Securityholders to Be Subrogated to Rights of Holders of
Senior Indebtedness........................................95
SECTION 12.05. Obligations of the Company Unconditional.....................96
SECTION 12.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice..........................................96
SECTION 12.07. Application by Trustee of Assets Deposited with It...........97
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PAGE
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SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness...........97
SECTION 12.09. Securityholders Authorize Trustee to Effectuate
Subordination of Securities................................97
SECTION 12.10. Right of Trustee to Hold Senior Indebtedness.................98
SECTION 12.11. Article Not to Prevent Events of Default....................98
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness...............................................98
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. TIA Controls.................................................99
SECTION 13.02. Notices......................................................99
SECTION 13.03. Communications by Holders with Other Holders................100
SECTION 13.04. Certificate and Opinion as to Conditions Precedent..........100
SECTION 13.05. Statements Required in Certificate or Opinion...............100
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar...................101
SECTION 13.07. Legal Holidays..............................................101
SECTION 13.08. Governing Law...............................................101
SECTION 13.09. No Adverse Interpretation of Other Agreements...............102
SECTION 13.10. No Recourse Against Others..................................102
SECTION 13.11. Successors..................................................102
SECTION 13.12. Duplicate Originals.........................................102
SECTION 13.13. Severability................................................102
SECTION 13.14. Table of Contents, Headings, Etc............................103
SECTION 13.15. Qualification of Indenture..................................103
SECTION 13.16. Registration Rights.........................................103
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INDENTURE, dated as of July 10, 1997 between Price Communications
Wireless, Inc., a Delaware corporation (the "Company") and Bank of Montreal
Trust Company, a New York banking corporation (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Company's 11 3/4%
Series A Senior Subordinated Notes due 2007 and the 11 3/4% Series B Senior
Subordinated Notes due 2007 which may be exchanged for the 11 3/4% Series A
Senior Subordinated Notes due 2007:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.02.
"Acceptance Amount" shall have the meaning specified in Section 4.15.
"Accumulated Amount" shall have the meaning specified in Section 4.15.
"Acquired Person" shall have the meaning as set forth in the definition
of "Permitted Investment."
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
without limiting the foregoing, the beneficial ownership of 10% or more of the
voting power of the voting common equity of such Person (on a fully diluted
basis) or of warrants or other rights to acquire such equity (whether or not
presently exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
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"Annualized Operating Cash Flow" on any date means, with respect to any
Person, the Operating Cash Flow of such Person for the Reference Period
multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction
Date") means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the Transaction
Date (after giving pro forma effect to the Incurrence of such Indebtedness)
divided by (ii) the aggregate amount of Annualized Operating Cash Flow of such
Person (determined on a pro forma basis after giving effect to all acquisitions
or dispositions of businesses made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
acquisition or disposition had occurred at the beginning of such Reference
Period); provided that for purposes of such computation, in calculating
Annualized Operating Cash Flow and consolidated Indebtedness, (a) the
transaction giving rise to the need to calculate the Annualized Operating Cash
Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first
day of the Reference Period; (b) the incurrence of any Indebtedness during the
Reference Period or subsequent thereto and on or prior to the Transaction Date
(and the application of the proceeds therefrom to the extent used to retire
Indebtedness or to acquire businesses) will be assumed to have occurred (on a
pro forma basis) on the first day of such Reference Period; (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the Transaction Date had been the applicable rate for the entire
period; and (d) all members of the consolidated group of such Person on the
Transaction Date that were acquired during the Reference Period shall be deemed
to be members of the consolidated group of such Person for the entire Reference
Period. When the foregoing definition is used in connection with the Company and
its Restricted Subsidiaries, references to a Person and its Subsidiaries in the
foregoing definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
"Asset Sale" shall have the meaning specified in Section 4.15.
"Asset Sale Offer" shall have the meaning specified in Section 4.15.
"Asset Sale Offer Amount" shall have the meaning specified in Section
4.15.
"Asset Sale Offer Price" shall have the meaning specified in Section
4.15.
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"Asset Sale Purchase Date" shall have the meaning specified in Section
4.15.
"Bank" shall have the meaning specified in Section 10.01.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligations" means obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest of such Person if such Person is a partnership.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after
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the date of acquisition and (iii) investments in money market funds
substantially all of whose assets comprise securities of the types described in
clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the assets
of the Company or Parent, on a consolidated basis, in one transaction or a
series of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other
than an Excluded Person or Excluded Group, is or becomes the "beneficial owner"
(as such term is used in Rule 13d-3 promulgated pursuant to the Exchange Act),
directly or indirectly, of more than 50% of the total equity of the transferee,
(ii) any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), other than an
Excluded Person or Excluded Group, is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly
or indirectly, of more than 50% of the total equity in the aggregate of all
classes of Capital Stock of the Company or Parent then outstanding normally
entitled to vote in elections of directors, or (iii) during any period of 12
consecutive months after the Issue Date, individuals who at the beginning of any
such 12-month period constituted the Board of Directors of the Company or Parent
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company or Parent was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company or Parent then in office.
"Change of Control Offer" shall have the meaning specified in Section
11.01.
"Change of Control Offer Period" shall have the meaning specified in
Section 11.01.
"Change of Control Purchase Date" shall have the meaning specified in
Section 11.01.
"Change of Control Purchase Price" shall have the meaning specified in
Section 11.01.
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"Change of Control Put Date" shall have the meaning specified in
Section 11.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all cash and Treasury Bills, and any proceeds
thereof, which are from time to time held in the Collateral Account.
"Collateral Account" means the trust account created and maintained
pursuant to Section 10.01.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"Company Systems" shall have the meaning specified in Section 4.15.
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to the Capitalized Lease Obligations) of such
Person and its consolidated Subsidiaries during such period, including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations, and
(iii) all commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and Interest
Swap and Hedging Obligations, in each case to the extent attributable to such
period, and (b) the amount of dividends accrued or payable by such Person or any
of its consolidated Subsidiaries in respect of Preferred Stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's Wholly
Owned Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such Person of an obligation of another Person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries.
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"Consolidated Net Income" of any Person for any period means the net
income (or loss) of such Person and its consolidated Subsidiaries for such
period, determined (on a consolidated basis) in accordance with GAAP, adjusted
to exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains and losses and gains and
losses that are nonrecurring (including as a result of Asset Sales outside the
ordinary course of business), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together with all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period, (iii), except as provided in the
definition of "Annualized Operating Cash Flow Ratio," the net income (or loss)
of any Subsidiary acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (iv) the net income, if positive, of
any Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or any agreement or instrument applicable to such
Subsidiary. When the foregoing definition is used in connection with the Company
and its Restricted Subsidiaries, references to a Person and its Subsidiaries in
the foregoing definition shall be deemed to refer to the Company and its
Restricted Subsidiaries.
"Contiguous" means, when used in connection with any existing RSA or
MSA of the Company or its Subsidiaries, a wireless cellular communications
system, any part of which exists within 50 miles of such RSA or MSA.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which address as of the date hereof is located at 77 Water Street, New York, New
York 10005.
"Covenant Defeasance" shall have the meaning specified in Section 8.03.
"Credit Agreement" means a credit agreement entered into by the Company
and a syndicate of banks, financial institutions and other "accredited
investors" (as defined in Regulation D under the Securities Act); led by
Donaldson, Lufkin & Jenrette Securities Corporation, as arranger, and DLJ
Capital Funding, as syndication agent, or any other senior loan facility
syndicated by DLJ Capital Funding in lieu thereof, together with the related
documents
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thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time (including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring or adding Restricted Subsidiaries of the
Issuer as additional borrowers or guarantors thereunder) and all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement whether by the same or any other agent, lender or group of lenders.
There can only be one such credit facility or loan agreement designated to be
the "Credit Agreement" at any one time. Any Indebtedness Incurred pursuant to
the second paragraph of Section 4.12 may be Incurred pursuant to the terms of
the Credit Agreement, provided that such Indebtedness so Incurred shall be
deemed to have been Incurred pursuant to the Credit Agreement for all purposes
of the Indenture other than with respect to Section 4.12 and clause (3) of the
first paragraph of Section 4.15.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect against
fluctuation in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
"Definitive Securities" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.03 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" means, so long as it is in effect, the
Credit Agreement and, thereafter, any Senior Indebtedness designated by the
Company to be "Designated Senior Indebtedness."
7
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"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of any event or the passage of time would be, required to be redeemed or
repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Securities; provided that Capital Stock will not be deemed to be
Disqualified Capital Stock if it may only be so redeemed or repurchased solely
in consideration of Qualified Capital Stock of the Company or Parent.
"Eligible Investments" mean United States Treasury Bills maturing no
later than the Business Day preceding December 31, 1997.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Event of Default" shall have the meaning specified in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchanged Capital Stock" shall have the meaning specified in Section
4.15.
"Exchange Securities" means the 11 3/4% Series B Senior Subordinated
Notes due 2007 to be issued pursuant to this Indenture in connection with the
offer to exchange Exchange Securities for the Initial Securities that may be
made by the Company pursuant to the Registration Rights Agreement.
"Excluded Group" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company or Parent
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a majority
of the voting power of the Capital Stock "beneficially owned" (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) by such "group."
"Excluded Person" means members of the Price Family who owned Capital
Stock of Parent on the Issue Date and any Affiliate of any of the foregoing that
is wholly owned by one of the foregoing.
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"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"Final Put Date" shall have the meaning specified in Section 4.15.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or, if FASB ceases to exist,
any successor thereto; provided, however, that for purposes of determining
compliance with covenants in the Indenture, "GAAP" means such generally accepted
accounting principles as in effect as of the Issue Date.
"Global Security" means a Security that contains the paragraph referred
to in footnote 1 and the additional schedule referred to in footnote 3 to the
form of Security attached hereto as Exhibit A.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered. The Holder of a Security will be treated as the owner of such
Security for all purposes.
"Holdings" means Price Communications Cellular Holdings, Inc., the
direct parent of the Company, and a subsidiary of Price Communications
Corporation.
"Holdings Securities" means preferred stock or debt securities issued
by Holdings prior to the Merger.
"Incur" shall have the meaning specified in Section 4.12.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or to financial institutions, which obligations are not being contested in good
faith and for which appropriate reserves have not been established) those
incurred in the ordinary course of its business that would constitute ordinarily
a trade payable to trade creditors, (iv) evidenced by bankers' acceptances or
similar instruments issued or
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accepted by banks, (v) for the payment of money relating to a Capitalized Lease
Obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit; (b) all
obligations of such Person under Interest Swap and Hedging Obligations; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such Person has guaranteed or that is otherwise its legal liability or
which are secured by any assets or property of such Person and all obligations
to purchase, redeem or acquire any Capital Stock; (d) all Disqualified Capital
Stock of such Person and all Preferred Stock of such Person's Subsidiaries; and
(e) any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a), (b),
(c), or (d) or this clause (e), whether or not between or among the same
parties; provided that the outstanding principal amount at any date of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such date.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Wasserstein Perella Securities, Inc., NatWest Capital Markets
Limited, Lehman Brothers Inc. and PaineWebber Incorporated.
"Initial Securities" means the 11 3/4% Series A Senior Subordinated
Notes due 2007, as supplemented from time to time in accordance with the terms
hereof, issued pursuant to this Indenture.
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities.
"Interest Swap and Hedging Obligations" means any obligations of any
Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of this Agreement, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such obligation provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such
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obligations shall be the net amount so determined, plus any premium due upon
default by such Person.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement to
make any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) or any commitment to make any such advance, loan or extension; (c) the
entering into by such Person of any guarantee of, or other contingent obligation
with respect to, Indebtedness or other liability of such other Person; (d) the
making of any capital contribution by such Person to such other Person; and (e)
the designation by the Board of Directors of the Company of any Person to be an
Unrestricted Subsidiary. For purposes of Section 4.04, (i) "Investment" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided that,
for purposes of this sentence, the fair market value of net assets in excess of
$5,000,000 shall be as determined by an independent appraiser of national
reputation.
"Issue Date" means the time and date of the first issuance of the
Securities under the Indenture.
"Junior Indebtedness" means Indebtedness of the Company that (i)
requires no payment of principal prior to or on the date on which all principal
of and interest on the Securities is paid in full and (ii) is subordinate and
junior in right of payment to the Securities in all respects.
"Junior Securities" of any Person means securities (including Capital
Stock but excluding Disqualified Capital Stock) issued by such Person to a
Holder on account of the Securities that (i) has a Weighted Average Life and
maturity or mandatory redemption obligation, if any, longer than, or occurring
after the final maturity date of, all Designated Senior Indebtedness of such
Person outstanding
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on the date of issuance of such Junior Securities, (ii) by their terms or by law
are subordinated to Designated Senior Indebtedness of such Person outstanding on
the date of issuance of such Junior Securities at least to the same extent as
the Securities and (iii) are not secured by any assets or property of the
Company or any of its Subsidiaries. As used herein, "Designated Senior
Indebtedness of such Person outstanding on the date of issuance of such Junior
Securities" shall include securities issued in connection with a reorganization
pursuant to the bankruptcy laws of any jurisdiction to Persons which held
"Designated Senior Indebtedness" in such reorganization proceeding.
"Legal Defeasance" shall have the meaning specified in Section 8.02.
"Legal Holiday" shall have the meaning specified in Section 13.07.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Security, the date
specified on such Security as the fixed date on which the final installment of
principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Asset Sale
Offer).
"Merger" means the merger of the Company with and into Palmer pursuant
to the Merger Agreement.
"Merger Agreement" means the agreement and plan of merger dated as of
May 23, 1997, among PCC, the Company and Palmer.
"Merger Date" means the time and date of the consummation of the
Merger.
"MSA" shall have the meaning specified in the definition of "Pops."
"Minimum Accumulation Date" shall have the meaning specified in
Section 4.15.
"Net Offering Proceeds" shall have the meaning specified in Section
4.20.
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"Net Cash Proceeds" means the aggregate amount of cash and Cash
Equivalents received by the Company and its Restricted Subsidiaries in respect
of an Asset Sale (including upon the conversion to cash and Cash Equivalents of
(A) any note or installment receivable at any time, or (B) any other property as
and when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent such cash and Cash Equivalents
are received within one year after such Asset Sale), less the sum of (i) all
reasonable out-of-pocket fees, commissions and other expenses incurred in
connection with such Asset Sale, including the amount (estimated in good faith
by the Board of Directors of the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any Restricted Subsidiary
of the Company in connection with such Asset Sale and (ii) the aggregate amount
of cash so received which is used to retire any existing Senior Indebtedness of
the Company or Indebtedness of its Restricted Subsidiaries, as the case may be,
which is required to be repaid in connection with such Asset Sale or is secured
by a Lien on the property or assets of the Company or any of its Restricted
Subsidiaries, as the case may be.
"Net Pops" of any Person with respect to any cellular telephone system
means the Pops of the MSA or RSA served by such system multiplied by the direct
and/or indirect percentage interest of such Person in the entity licensed or
designated to receive an authorization by the Federal Communications Commission
to construct or operate a system in that MSA or RSA.
"Net Proceeds" means the aggregate net proceeds (including the fair
market value of non-cash proceeds constituting equipment or other assets of a
type generally used in a Related Business an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Non-Recourse Restricted Subsidiary" shall have the meaning specified
in the definition of "Permitted Acquisition Indebtedness."
"Notice of Default" shall have the meaning specified in Section
6.01(c).
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications,
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reimbursements, damages and other liabilities payable pursuant to the terms of
the documentation governing any Indebtedness.
"Offering Memorandum" means that certain Offering Memorandum of the
Company, dated July 2, 1997 relating to the original issuance and sale of the
Initial Securities to the Initial Purchasers.
"Officer" means, with respect to the Company, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of the Company.
"Officers' Certificate" means, with respect to the Company or the
Parent, a certificate signed by two Officers or by an Officer and an Assistant
Secretary of the Company or the Parent, respectively, and otherwise complying
with the requirements of Sections 13.04 and 13.05.
"Operating Cash Flow" of any Person means (a) with respect to any
period, the Consolidated Net Income of such Person for such period, plus (b) the
sum, without duplication (and only to the extent such amounts are deducted from
net revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of such
Person and its consolidated Subsidiaries and (iii) Consolidated Interest Expense
of such Person for such period, determined, in each case, on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with GAAP,
less (c) the amount of all cash payments made during such period by such Person
and its Subsidiaries to the extent such payments relate to non-cash charges that
were added back in determining Operating Cash Flow for such period or for any
prior period. When the foregoing definition is used in connection with the
Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.04 and 13.05.
"Palmer" means Palmer Wireless, Inc., a Delaware corporation.
"Parent" shall mean PCC or any directly or indirectly wholly owned
subsidiary of PCC that directly or indirectly wholly owns the Company until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
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"Paying Agent" shall have the meaning specified in Section 2.03.
"Payment Blockage Period" shall have the meaning specified in Section
12.02.
"Payment Default" shall have the meaning specified in Section 12.02.
"Payment Notice" shall have the meaning specified in Section 12.02.
"PCC" means Price Communications Corporation, a New York corporation.
"PCC Equity Contribution" means the $128.3 million equity contribution
from PCC or a Subsidiary of PCC which is a Parent of the Company in the form of
cash or common stock of Palmer to the Company in accordance with the terms
thereof described in the Offering Memorandum.
"Permitted Acquisition Indebtedness" means, with respect to any Person,
Indebtedness Incurred in connection with the acquisition of property, businesses
or assets which, or Capital Stock of a Person all or substantially all of whose
assets, are of a type generally used in a Related Business; provided that, in
the case of the Company or its Restricted Subsidiaries, as applicable, (x)(i)
the Company's Annualized Operating Cash Flow Ratio, after giving effect to such
acquisition and such Incurrence on a pro forma basis, is no greater than such
ratio prior to giving pro forma effect to such acquisition and such Incurrence,
(ii) the Company's consolidated Senior Indebtedness, divided by the Net Pops of
the Company and its Restricted Subsidiaries, in each case giving pro forma
effect to the acquisition and such Incurrence, does not exceed $120, (iii) the
Company's consolidated Indebtedness divided by the Net Pops of the Company and
its Restricted Subsidiaries does not exceed $160 as a result of the acquisition
and such Incurrence and (iv) after giving effect to such acquisition and such
Incurrence the acquired property, businesses or assets or such Capital Stock is
owned directly by the Company or a Wholly Owned Restricted Subsidiary of the
Company, or (y)(i) under the terms of such Indebtedness and pursuant to
applicable law, no recourse could be had for the payment of principal, interest
or premium with respect to such Indebtedness or for any claim based thereon
against the Company or any Person that constituted a Restricted Subsidiary
immediately prior to the consummation of such acquisition or any of their
property or assets, (ii) the obligor of such Indebtedness shall have,
immediately after giving effect to such acquisition and such Incurrence on a pro
forma basis, a ratio of Annualized Operating Cash Flow as of the date of the
acquisition to the product of Consolidated Interest Expense for the Reference
Period multiplied by four (but
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excluding from Consolidated Interest Expense all amounts that are not required
to be paid in cash on a current basis) of at least 1 to 1 and (iii) immediately
subsequent to the Incurrence of such Indebtedness, the obligor thereof shall be
a Restricted Subsidiary and shall have been designated by the Company (as
evidenced by an Officers' Certificate delivered promptly to the Trustee) to be a
"Non-Recourse Restricted Subsidiary."
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary (other than a Non-Recourse
Restricted Subsidiary); (iii) Investments in a Person substantially all of whose
assets are of a type generally used in a Related Business (an "Acquired Person")
if, as a result of such Investments, (A) the Acquired Person immediately
thereupon becomes a Restricted Subsidiary (other than a Non-Recourse Restricted
Subsidiary) or (B) the Acquired Person immediately thereupon either (1) is
merged or consolidated with or into the Company or any of its Restricted
Subsidiaries (other than a Non-Recourse Restricted Subsidiary) and the surviving
Person is the Company or a Restricted Subsidiary (other than a Non-Recourse
Restricted Subsidiary) or (2) transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or any of its Restricted
Subsidiaries (other than a Non-Recourse Restricted Subsidiary); (iv) Investments
in accounts and notes receivable acquired in the ordinary course of business;
(v) any securities received in connection with an Asset Sale (other than those
of a Non-Recourse Restricted Subsidiary) and any Investment with the Net Cash
Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially
all of whose assets are of a type used in a Related Business, that complies with
Section 4.15; (vi) any guarantee issued by a Restricted Subsidiary in respect of
Senior Indebtedness Incurred in compliance with the Indenture; (vii) advances
and prepayments for asset purchases in the ordinary course of business in a
Related Business of the Company or a Restricted Subsidiary; (viii) Investments
in Non-Recourse Restricted Subsidiaries with the proceeds of contributions
irrevocably and unconditionally received without restriction by the Company from
Parent; and (ix) customary loans or advances made in the ordinary course of
business to officers, directors or employees of the Company or any of its
Restricted Subsidiaries for travel, entertainment, and moving and other
relocation expenses.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business,
provided
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that (i) the underlying obligations are not overdue for a period of more than 30
days, and (ii) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained on the
books of the Company in accordance with GAAP; (d) Liens securing the performance
of bids, trade contracts (other than borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (e) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the property, subject thereto (as such property is
used by the Company or any of its Restricted Subsidiaries) or interfere with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (f) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto; (g) pledges or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security legislation; (h) Liens
in favor of the Trustee arising under the Indenture; (i) Liens securing
Permitted Acquisition Indebtedness, which either (A) were not incurred or issued
in anticipation of such acquisition or (B) secure Permitted Acquisition
Indebtedness meeting the requirements set forth in clause (y) of the definition
thereof; (j) Liens securing Senior Indebtedness that was incurred in accordance
with Section 4.12; (k) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or is merged with or into the
Company or a Restricted Subsidiary, provided that such Liens were in existence
prior to the date of such acquisition, merger or consolidation, were not
incurred in anticipation thereof, and do not extend to any other assets; (l)
Liens arising from Purchase Money Indebtedness permitted under the Indenture;
(m) Liens securing Refinancing Indebtedness Incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Securities than the terms of the Liens securing such refinanced
Indebtedness; and (n) Liens in favor of the Company or a Wholly Owned Restricted
Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Pops" means the estimate of the population of a Metropolitan
Statistical Area ("MSA") or Rural Service Area ("RSA") as derived from the most
recent Donnelly Market Service or if such statistics are no longer printed in
the Donnelly Market Service or the Donnelly Market Service is no longer
published, the most recent Rand McNally Commercial Atlas or if such statistics
are no longer printed
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in the Rand McNally Commercial Atlas or the Rand McNally Commercial Atlas is no
longer published, such other nationally recognized source of such information.
"Preferred Stock" means Capital Stock, other than common stock of an
issuer having no preferences or privileges as to the payment of dividends or the
distribution of the issuer's assets over any other class of such issuer's
Capital Stock.
"Price Family" means Robert Price, an individual, and members of his
family who, as of the Issue Date, beneficially owned Capital Stock of Parent.
"principal" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, applicable premium, if any, on such
Indebtedness.
"property" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Agreement" means that certain Purchase Agreement dated July
3, 1997 by and among the Company, PCC and the Initial Purchasers, as such
agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property or
assets for the business of the Company or its Restricted Subsidiaries, provided
that the recourse of the lenders with respect to such Indebtedness is limited
solely to the property or assets so purchased without further recourse to either
the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is
not Disqualified Capital Stock.
"Record Date" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption (including the Special
Redemption Date) pursuant to Article 3 of this Indenture and Paragraph 5 in the
form of Security.
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"Redemption Price," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Article 3
of this Indenture and Paragraph 5 in the form of Security, which shall include,
without duplication, in each case, any accrued and unpaid interest to the
Redemption Date.
"Reference Period" with regard to any Person means the last full fiscal
quarter of such Person for which financial information (which the Company shall
use its best efforts to compile in a timely manner) in respect thereof is
available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Securities or the
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference (or, if such Indebtedness
or Disqualified Capital Stock does not require cash payments prior to maturity
or is otherwise issued at a discount, the original issue price of such
Indebtedness or Disqualified Capital Stock), not to exceed the sum of (x) the
lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing, (y) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such Indebtedness and (z) all other customary fees and expenses of the Company
or such Restricted Subsidiary reasonably incurred in connection with such
refinancing; provided that (A) Refinancing Indebtedness issued by any Restricted
Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Restricted Subsidiary, (B)
Refinancing Indebtedness shall (x) not have a Weighted Average Life shorter than
the Indebtedness or Disqualified Capital Stock to be so refinanced at the time
of such Refinancing and (y) in all respects, be no less subordinated or junior,
if applicable, to the rights of Holders of the Securities than was the
Indebtedness or Disqualified Capital Stock to be refinanced and (C) such
Refinancing Indebtedness shall have no installments of principal (or redemption
payment) scheduled to come due earlier than the scheduled maturity of any
installment of principal (or redemption
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payment) of the Indebtedness or Disqualified Capital Stock to be so refinanced
which was scheduled to come due prior to the Stated Maturity of the Securities.
"Registrar" shall have the meaning specified in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated July 10, 1997 by and among the Initial Purchasers and the Company, as such
agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"Related Business" means any business directly related to the
ownership, development, operation, and acquisition of wireless cellular
communications systems.
"Related Person" means, with respect to any Person, (i) any Affiliate
of such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any trust
in which any Person described in clause (i) above has a beneficial interest.
"Restricted Partnership" shall have the meaning specified in Section
4.19.
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on shares of Capital Stock of such Person, its
Parent, or any Subsidiary of such Person by such Person or any Subsidiary of
such Person, (ii) any payment on account of the purchase, redemption or other
acquisition or retirement for value, or any payment in respect of any amendment
(in anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any shares of Capital Stock of such Person,
its Parent or any Subsidiary of such Person held by Persons other than such
Person or any of its Restricted Subsidiaries, (iii) any defeasance, redemption,
repurchase or other acquisition or retirement for value, or any payment in
respect of any amendment (in anticipation of or in connection with any such
retirement, acquisition or defeasance) in whole or in part, of any Indebtedness
of the Company (other than the scheduled repayment thereof at maturity and any
mandatory redemption or mandatory repurchase thereof pursuant to the terms
thereof) by such Person or a Subsidiary of such Person that is subordinate in
right of payment to, or ranks pari passu (other than the Securities) with, the
Securities (other than in exchange for Refinancing Indebtedness permitted to be
Incurred under the Indenture and except for any such defeasance, redemption,
repurchase, other acquisition or payment in respect of Indebtedness held by any
Restricted Subsidiary) and (iv) any Investment (other than a Permitted
Investment); provided, however, that the term
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"Restricted Payment" does not include (i) any dividend, distribution or other
payment on shares of Capital Stock of the Company or any Restricted Subsidiary
solely in shares of Qualified Capital Stock, (ii) any dividend, distribution or
other payment to the Company, or any dividend to any of its Restricted
Subsidiaries, by any of its Subsidiaries, (iii) the purchase, redemption or
other acquisition or retirement for value of shares of Capital Stock of any
Restricted Subsidiary (other than Non-Recourse Restricted Subsidiaries) held by
Persons other than the Company or any of its Restricted Subsidiaries, (iv)
payments to satisfy obligations to pay statutory appraisal rights resulting from
the Merger and any settlement in respect thereof to security holders of Palmer,
(v) fees and expenses incurred in connection with the Merger and (vi) cash
payments in respect of purchases of options and rights for shares of Palmer
common stock issued pursuant to Palmer's 1995 Stock Option Plan, 1995 Directors'
Stock Option Plan, 1995 Employee Stock Purchase Plan and 1995 Non-Employee
Director Stock Purchase Plan.
"Restricted Security" means a Security, unless or until it has been (i)
disposed of in a transaction effectively registered under the Securities Act or
(ii) distributed to the public pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act; provided that in no case shall an
Exchange Security issued in accordance with this Indenture and the terms and
provisions of the Registration Rights Agreement be a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company which at
the time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of Section 4.12, on a pro forma basis, taking
into account such designation.
"RSA" shall have the meaning specified in the definition of "Pops."
----
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities and, when and
if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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"Securities Custodian" means the Trustee, as custodian for the
Depositary with respect to the Securities in global form, or any successor
entity thereto.
"Senior Indebtedness" means all Indebtedness of the Company (including,
with respect to the Credit Agreement, all Obligations) including inter est
thereon, whether outstanding on the Issue Date or thereafter issued, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Securities.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include (a) Indebtedness that is expressly subordinated or junior in
right of payment to any Indebtedness of the Company, (b) Indebtedness
represented by Disqualified Capital Stock, (c) any liability for federal, state,
local or other taxes owed or owing by the Company, (d) Indebtedness of the
Company to any Subsidiary of the Company or any Affiliate of the Company (other
than Purchase Money Indebtedness constituting at least 75% but not more than
100% of the cost of wireless cellular communication system equipment and other
related fixed assets, Incurred in compliance with Section 4.12), (e) trade
payables and (f) Indebtedness to the extent incurred in violation of the
Indenture.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of the
net book value of the assets of the Company and its Restricted Subsidiaries on a
consolidated basis.
"Special Record Date" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"Special Redemption" shall have the meaning specified in Section 3.01.
"Special Redemption Amount" shall have the meaning specified in
Section 4.20.
"Special Redemption Date" shall have the meaning specified in Section
3.01.
"Special Rights" shall have the meaning specified in Section 4.19.
"Stated Maturity" means the date fixed for the payment of any principal
or premium pursuant to the Indenture and the Securities, including the Maturity
Date, upon redemption, acceleration, Asset Sale Offer, Change of Control Offer
or otherwise.
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"Subsidiary" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
77bbbb) as in effect on the date of the execution of this Indenture.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Treasury Bills" means (a) book-entry United States Treasury bills (i)
held in a Participant's Securities Account (as defined in 31 C.F.R. (S)357.2)
with the Federal Reserve Bank of New York pursuant to the Treasury/Reserve
Automated Debt Entry System and (ii) maturing no later than the Business Day
preceding December 31, 1997 and (b) securities entitlements in respect of United
States Treasury bills referred to in (a) above.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust division
(or any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his knowledge of and familiarity with the
particular subject.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company
that, at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below). The
Board of Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the time
it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no
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Default or Event of Default is existing or will occur as a consequence thereof,
(b) such Subsidiary does not own any Capital Stock of, or own or hold any Lien
on any property or asset of, the Company or any Restricted Subsidiary that is
not a Subsidiary of the Subsidiary to be so designated and (c) such Subsidiary
and each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee, or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any property or assets of the Company or any of its
Restricted Subsidiaries (except that such Subsidiary and its Subsidiaries may
guarantee the Securities); provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted pursuant to
Section 4.04. Each such designation shall be evidenced by filing with the
Trustee a certified copy of the resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations of,
or noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"U.S. Legal Tender Equivalents" means securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof with a maturity of 90 days or less (provided that the
full faith and credit of the United States of America is pledged in support
thereof).
"Voting Stock" means Capital Stock of the Company having generally the
right to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters of
the Company.
"Weighted Average Life" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i)
a Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one
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stockholder, but which interest is not in excess of what is required for such
purpose) is owned directly by such Person or through one or more other Wholly
Owned Subsidiaries of such Person, or (ii) any entity other than a corporation
in which such Person, directly or indirectly, owns not less than 99% of the
Capital Stock of such entity.
SECTION 1.02. Incorporation by Reference of TIA. Whenever this
Indenture refers to a provision of the TIA, such provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company and any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
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<PAGE>
(5) provisions apply to successive events and
transactions;
(6) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(7) references to Sections or Articles means
reference to such Section or Article in this Indenture,
unless stated otherwise; and
(8) whenever in this Indenture or the Securities it
is provided that the principal amount with respect to a
Security shall be paid, such provision shall be deemed to
require (whether or not so expressly stated) the
simultaneous payment of any accrued and unpaid interest to
the date of payment on such Security payable pursuant to
paragraph 1 of the Securities.
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the Trustee's
certificate of authentication in respect thereof shall be substantially in the
form of Exhibit A hereto, which Exhibit is part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company shall approve the form of the Securities and
any notation, legend or endorsement on them. Any such notations, legends or
endorsements not contained in the form of Security attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Security shall be dated the
date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. Execution and Authentication. Each Security shall be
signed by at least one Officer for the Company by manual or facsimile signature.
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The Company's seal may be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Initial Securities for original issue in
the aggregate principal amount of up to $175,000,000 and shall authenticate
Exchange Securities for original issue in the aggregate principal amount of up
to $175,000,000, in each case upon a written order of the Company in the form of
an Officers' Certificate; provided that such Exchange Securities shall be
issuable only upon the valid surrender for cancellation of Initial Securities of
a like aggregate principal amount in accordance with the Registration Rights
Agreement. The Officers' Certificate shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed $175,000,000, except as provided in Section 2.07. Upon the written order
of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
an office or agency in the Borough of Manhattan, The City of New York, where
Securities may be presented for registration of transfer or for exchange
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("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent") and where notices and demands to or upon the Company in
respect of the Securities may be served. The Company may act as Registrar or
Paying Agent, except that, for the purposes of Articles 3, 8, 10, 11, Section
4.15 and as otherwise specified in the Indenture, neither the Company nor any
Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a
register of the Securities and of their transfer and exchange. The Company may
have one or more co-Registrars and one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. The Company hereby
initially appoints the Trustee as Registrar and Paying Agent, and the Trustee
hereby agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
SECTION 2.04. Paying Agent to Hold Assets in Trust. The Company shall
require each Paying Agent other than the Trustee to agree in writing that each
Paying Agent shall hold in trust for the benefit of the Holders or the Trustee
all assets held by the Paying Agent for the payment of principal of, premium, if
any, or interest on, the Securities (whether such assets have been distributed
to it by the Company or any other obligor on the Securities), and shall notify
the Trustee in writing of any Default in making any such payment. If either of
the Company or a Subsidiary of the Company acts as Paying Agent, it shall
segregate such assets and hold them as a separate trust fund for the benefit of
the Holders or the Trustee. The Company at any time may require a Paying Agent
to distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent (if other than
the Company) shall have no further liability for such assets.
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SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee on or before the third Business Day
preceding each Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee
reasonably may require of the names and addresses of Holders.
SECTION 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented to the Registrar or a co-Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are
Definitive Securities, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Securities are being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, a certification from such
Holder to that effect (in substantially the form set forth on the
reverse of the Security); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A
under the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security);
or
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(C) if such Transfer Restricted Security is being
transferred pursuant to any exemption from registration in
accordance with Regulation S under the Securities Act, a
certification to that effect (in substantially the form set
forth on the reverse of the Security); or
(D) if such Transfer Restricted Security is being
transferred to an institutional investor that is an
"accredited investor" within the meaning of Rule
501(a)(1),(2),(3) or (7) under the Securities Act which
delivers a certificate in the form of Exhibit B to the
Indenture to the Trustee; or
(E) if such Transfer Restricted Security is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act, a
certification to that effect (in substantially the form set
forth on the reverse of the Security) accompanied by a
customary opinion of counsel substantially to the effect that
such transfer may be effected in reliance upon such exemption.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted
Security, certification, substantially in the form set forth on
the reverse of the Security, that such Definitive Security is
being transferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance with Rule
144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer
Restricted Security, written instructions directing the Trustee to
make, or to direct the Securities Custodian to make, an
endorsement on the Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the
Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
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procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate a new Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security.
(i) Upon receipt by the Trustee of written instructions or such other
form of instructions as is customary for the Depository from the Depository or
its nominee on behalf of any Person having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such other form
of instructions as is customary for the Depository or the Person designated by
the Depository as having such a beneficial interest in a Transfer Restricted
Security only, the following additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner,
a certification from such person to that effect (in substantially
the form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities
Act, a certification to that effect from the transferor (in
substantially the form set forth on the reverse of the Security);
or
(C) if such beneficial interest is being transferred
pursuant to any exemption from registration in accordance with
Regulation S under the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of the
Security); or
(D) if such Transfer Restricted Security is being
transferred to an institutional investor that is an "accredited
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investor" within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act which delivers a certificate in
the form of Exhibit B to the Indenture to the Trustee; or
(E) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification to that
effect from the transferee or transferor (in substantially the
form set forth on the reverse of the Security) accompanied by
a customary opinion of counsel substantially to the effect
that such transfer may be effected in reliance upon such
exemption,
then the Trustee or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication order in the form of
an Officers' Certificate, the Trustee will authenticate and deliver to the
transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Securities to the persons in whose names
such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of Depository.
If at any time:
(i) the Depository for the Securities notifies the Company
that the Depository is unwilling or unable to continue as Depository
for the Global Securities and a successor Depository for the Global
Securities is
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not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, in its sole discretion, notifies the Trustee
in writing that they elect to cause the issuance of Definitive
Securities under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will authenticate and deliver Definitive Securities, in an aggregate principal
amount equal to the principal amount of the Global Securities, in exchange for
such Global Securities.
(g) Legends
(i) Except as permitted by the following paragraph (ii), each
Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor
or substitution thereof) shall bear a legend in substantially the
following form:
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB"), OR (B) IT IS NOT A U.S. PERSON,
IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE
TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO
ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES
ACT, IF APPLICABLE) UNDER THE
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SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF
THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE, AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY RULE 902 OF REGULATIONS UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER A TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a
Global Security) pursuant to Rule 144 under the Act or an effective
registration statement under the Act:
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(A) in the case of any Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security
for a Definitive Security that does not bear the legend set
forth above and rescind any restriction on the transfer of
such Transfer Restricted Security in the case of a Rule 144
Transfer, after delivery of a customary opinion of counsel;
and
(B) any such Transfer Restricted Security represented by
a Global Security shall not be subject to the provisions set
forth in (i) above (such sales or transfers being subject only
to the provisions of Section 2.06(c) hereof); provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Security that is represented by a Global
Security for a Definitive Security that does not bear a
legend, which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing (to be accompanied by
a customary opinion of counsel) to the Registrar that such
request is being made pursuant to Rule 144 (such certification
to be substantially in the form set forth on the reverse of
the Security).
(h) Cancellation and/or Adjustment of Global Security. At such time as
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or cancelled, such Global Security
shall be returned to or retained and cancelled by the Trustee. At any time prior
to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) Obligations with respect to Transfers and Exchanges of Definitive
Securities.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities and Global Securities at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar
governmental
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charge payable in connection therewith (other than any such transfer
taxes, assessments, or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.02 (fourth paragraph),
2.10, 3.07, 4.15(8), 9.05, or 11.01 (final paragraph)).
(iii) The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article 3,
except the unredeemed portion of any Definitive Security being redeemed
in part, or (b) any Security for a period beginning 15 Business Days
before the mailing of a notice of an offer to repurchase pursuant to
Article 11 or Section 4.15 hereof or the mailing of a notice of
redemption of Securities pursuant to Article 3 hereof and ending at the
close of business on the day of such mailing.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Trustee or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Trustee, to the Trustee to the
effect that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security if
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Security is
replaced. The Company may charge such Holder for its reasonable, out-of-pocket
expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
time are all the Securities that have been authenticated by the Trustee
(including any Security represented by a Global Security) except those cancelled
by it, those delivered to it for cancellation, those reductions in the interest
in a Global Security effected by the Trustee hereunder and those described in
this Section 2.08 as not outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security, except as provided in Section 2.09.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a
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bona fide purchaser. A mutilated Security ceases to be outstanding upon
surrender of such Security and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of a Company) holds cash sufficient to pay all
of the principal and interest due on the Securities payable on that date and
payment of the Securities called for redemption or payable on such Maturity Date
is not otherwise prohibited pursuant to this Indenture, then on and after that
date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.09. Treasury Securities. In determining whether the Holders
of the required principal amount of Securities have concurred in any direction,
amendment, supplement, waiver or consent, Securities owned by the Company or
Affiliates of the Company shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, amendment, supplement, waiver or consent, only Securities that the
Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company reasonably and in
good faith considers appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as permanent Securities authenticated and delivered
hereunder.
SECTION 2.11. Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for transfer,
exchange or payment. The Trustee, or at the direction of the Trustee, the
Registrar or the Paying Agent (other than the Company or an Affiliate of the
Company), and no one else, shall cancel and, at the written direction of the
Company, shall dispose of all Securities surrendered for transfer, exchange,
payment or cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that have been paid or delivered to the Trustee
for cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities cancelled as provided in this Section 2.11, except as
expressly permitted in the form of Securities and as permitted by this
Indenture.
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SECTION 2.12. Defaulted Interest. Interest on any Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the person in whose name that Security (or one or more
predecessor Securities) is registered at the close of business on Record Date
for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the
Securities (or their respective predecessor
Securities) are registered at the close of business
on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security and the
date of the proposed payment, and at the same time
the Company shall deposit with the Trustee an amount
of cash equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed
payment, such cash when deposited to be held in trust
for the benefit of the persons entitled to such
Defaulted Interest as provided in this clause (1).
Thereupon the Trustee shall fix a Special Record Date
for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and
not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his
address as it appears in the Security register not
less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted
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Interest and the Special Record Date therefor having
been mailed as aforesaid, such Defaulted Interest
shall be paid to the persons in whose names the
Securities (or their respective predecessor
Securities) are registered on such Special Record
Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any
Defaulted Interest in any other lawful manner not
inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and
upon such notice as may be required by such exchange,
if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such
manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
ARTICLE 3
REDEMPTION
SECTION 3.01. Redemption.
(a) Right of Redemption. Redemption of Securities, as permitted by any
provision of this Indenture, shall be made in accordance with such provision and
this Article 3. The Company will not have the right to redeem any Securities
prior to July 15, 2002. On or after July 15, 2002, the Company will have the
right to redeem all or any part of the Securities at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth therein under
the caption "Redemption," in each case, including accrued and unpaid interest,
if any, to the applicable Redemption Date (subject to the right of Holders of
record on the relevant regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
Notwithstanding the foregoing paragraph (a), prior to July 10, 2002, in
the event that the Company or Parent consummates one or more offerings of their
Qualified Capital Stock on or before the third anniversary of the date of the
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issuance of the Securities, the Company may at its option, use all or a portion
of the cash contributed to it from such offerings to redeem up to 35% of the
original aggregate principal amount of the Securities at a cash redemption price
equal to 111.75% of the principal amount of the Securities plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that at least
65% of the original aggregate principal amount of the Securities remains
outstanding thereafter.
(b) Special Redemption. Notwithstanding paragraph (a) of this section,
if (i) the Merger is not consummated on or before December 31, 1997 or (ii) if
it appears, in the sole judgment of the Company evidenced by a Board Resolution,
that the Merger will not be consummated by December 31, 1997, the Company shall
redeem the Securities (the "Special Redemption") on, or at any time prior to,
December 31, 1997 at a redemption price of 101% of the principal amount of the
Securities plus accrued interest to the date of the Special Redemption (the
"Special Redemption Date").
SECTION 3.02. Notices to Trustee. If the Company elects or is required
to redeem Securities pursuant to Paragraph 5 of the Securities, it shall notify
the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed and whether it wants the Trustee to give notice of
redemption to the Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice, provided that no Initial Securities
received by the Company in exchange for Exchange Securities may be made the
basis for such credit.
The Company shall give each notice to the Trustee provided for in this
Section 3.02 with respect to any optional redemption pursuant to Section 3.01(a)
at least 45 days before the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee). Any such notice may be cancelled at any time prior
to notice of such redemption being mailed to any Holder and shall thereby be
void and of no effect.
SECTION 3.03. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5(a) thereof, the Trustee shall select the Securities to be redeemed
on a pro
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rata basis, by lot, or by such other method as the Trustee shall determine to be
fair and appropriate and in such manner as complies with any applicable
Depositary, legal and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
SECTION 3.04. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date
other than the Special Redemption Date, the Company shall mail a notice of re-
demption by first class mail, postage prepaid, to the Trustee and each Holder
whose Securities are to be redeemed. In the event of the Special Redemption, the
Company shall mail by first class mail, postage prepaid, a notice of redemption
to the Trustee and each Holder at least 5 Business Days before the Special
Redemption Date. At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice for
redemption shall identify the Securities to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price, including the amount of accrued and unpaid
interest, if any, to be paid upon such redemption;
(c) the name, address and telephone number of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the Redemption
Price;
(e) that, unless (i) with respect to a redemption pursuant to
Paragraph 5(a) of the Securities, the Company defaults in its obligation to
deposit cash with the Paying Agent in accordance with Section 3.06 hereof or
(ii) such redemption payment is prohibited pursuant to Article 12 hereof or
other laws, the interest on Securities (or portion thereof) called for
redemption ceases to accrue
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on and after the Redemption Date and the only remaining right of the Holders of
such Securities is to receive payment of the Redemption Price, as the case may
be, including any accrued and unpaid interest to the Redemption Date, upon
surrender to the Paying Agent of the Securities called for redemption and to be
redeemed;
(f) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple thereof, of such
Security to be re deemed and that, after the Redemption Date, and upon surrender
of such Security, a new Security or Securities in aggregate principal amount
equal to the unredeemed portion thereof will be issued;
(g) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be redeemed,
as well as the aggregate principal amount of such Securities to be redeemed and
the aggregate principal amount of Securities to be outstanding after such
partial redemption;
(h) the CUSIP number of the Securities to be redeemed; and
(i) that the notice is being sent pursuant to this Section 3.04 and
pursuant to the optional redemption provisions of Paragraph 5(a) of the
Securities or the special redemption provisions of Paragraph 5(b) of the
Securities, as the case may be.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.04,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price including any accrued and unpaid interest to the
Redemption Date, if any. Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price,
including interest, if any, accrued and unpaid to the Redemption Date; provided
that if the Redemption Date is after a regular Record Date and on or prior to
the Interest Payment Date, the accrued interest shall be payable to the Holder
of the redeemed Securities registered on the relevant Record Date; and provided,
further, that if a Redemption Date is a Legal Holiday, payment shall be made on
the next succeeding Business Day and no interest shall accrue for the period
from such Redemption Date to such succeeding Business Day.
SECTION 3.06. Deposit of Redemption Price. On or prior to any
Redemption Date, other than a Special Redemption Date, the Company shall deposit
with the Paying Agent (other than the Company or an Affiliate of the Company)
cash sufficient to pay the Redemption Price of, including any accrued
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and unpaid interest on, all Securities to be redeemed on such Redemption Date
(other than Securities or portions thereof called for redemption on that date
that have been delivered by the Company to the Trustee for cancellation). The
Paying Agent shall promptly return to the Company any cash so deposited which is
not required for that purpose upon the written request of the Company.
One Business Day prior to the Special Redemption Date, the Trustee
shall withdraw Treasury Bills and proceeds from the Collateral Account, sell
such Treasury Bills and deliver to the Paying Agent on behalf of the Company an
amount equal to the Redemption Price, and the Paying Agent shall on behalf of
the Company apply that amount to redeem the Securities on the Special Redemption
Date as provided by Section 3.01.
If the Company complies with the preceding paragraph and the other
provisions of this Article 3 and payment of the Securities called for redemption
is not prohibited under this Indenture, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.02 hereof and the Securities.
SECTION 3.07. Securities Redeemed in Part. Upon surrender of a Security
that is to be redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder, without service charge to the Holder, a
new Security or Securities equal in principal amount to the unredeemed portion
of the Security surrendered.
ARTICLE 4
COVENANTS
SECTION 4.01. Transactions Not Subject to Covenants. Notwithstanding
anything to the contrary in this Indenture, the following transactions shall not
be prohibited by this Indenture (regardless of the form or substance of the
transaction or series of transactions effecting the same):
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(a) the Merger, including, without limitation, (i) payments made by
the Company to fund (x) the cash consideration payable in the Merger (including,
whether or not required by the Merger Agreement, pursuant to statutory appraisal
rights and any settlement thereof) to security holders of Palmer and (y) fees
and expenses of the Company incurred in connection with the Merger, (ii) the
Incurrence, as a result of the Merger, of any Indebtedness of Palmer or any
subsidiary of Palmer, which Indebtedness was in existence immediately prior to
the Merger and not incurred in contemplation thereof, (iii) the assumption or
the suffering to exist of any consensual encumbrance or restriction on the
ability of Palmer or any Subsidiary thereof to pay dividends or make other
distributions on the Capital Stock of any Subsidiary or to pay or satisfy any
obligation to Palmer or any of its Subsidiaries or to otherwise transfer assets
or make or pay loans or advances to Palmer or any of its Subsidiaries, which
encumbrance or restriction was contained in an instrument that was in effect
immediately prior to the Merger and not put into place in contemplation thereof
and (iv) the Incurrence or the suffering to exist of any Lien upon any of the
property or assets of Palmer or any of its Subsidiaries which Liens were in
existence immediately prior to the effectiveness of the Merger and not imposed
in contemplation thereof; and
(b) any transaction involving FMT Ltd. or any subsidiary of FMT Ltd.
or any of their assets or the Company's partnership interest in FMT Ltd. (each
"FMT-Related Assets") provided that, in the case of this clause (b), no such
transaction shall (i) in and of itself cause or result in an increase in the
consolidated Indebtedness of the Company and its Restricted Subsidiaries on and
after the 45th day after the Merger Date from that existing immediately prior to
such transaction, (ii) cause or result in the sale of any asset of the Company
other than FMT-Related Assets, (iii) cause or result in the imposition of any
Lien on any property or assets of the Company or any of its Restricted
Subsidiaries other than solely upon an FMT-Related Asset, (iv) cause or result
in the imposition of any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company (other than FMT Ltd. or any Subsidiary
thereof) to pay dividends or make other distributions on the Capital Stock of
any Restricted Subsidiary of the Company or pay or satisfy any obligation to the
Company or any of its Restricted Subsidiaries or otherwise transfer assets or
make or pay loans or advances to the Company or any of its Restricted
Subsidiaries, (v) cause or result in any dividend or distribution by the Company
or any Investment in any Person except a Restricted Subsidiary or a Subsidiary
of FMT Ltd., (vi) cause or result in the Incurrence of any Indebtedness of the
Company ranking senior to the Notes but junior to any Senior Indebtedness;
provided, however, that prior to the 45th day after the Merger Date the
Company's consolidated Indebtedness may increase as a result of such transaction
by no more than $169 million (plus accrued interest thereon). Notwithstanding
the foregoing provisions of this Section 4.01, neither
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the Company nor any of its Restricted Subsidiaries (other than FMT Ltd. or any
of its Subsidiaries) shall make any Investment in FMT Ltd. or any of its
Subsidiaries. In addition, the Merger shall not constitute a Change of Control
and no transaction described in Section 4.01(b) shall be taken into account in
any calculation under Section 4.04.
SECTION 4.02. Payment of Securities. The Company shall pay the
principal of and interest on the Securities on the dates and in the manner
provided in the Securities. An installment of principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, cash deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
SECTION 4.03. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby initially designates the Corporate Trust Office of the Trustee as
such office.
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SECTION 4.04. Limitation on Restricted Payments. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly after the Issue Date, make any Restricted Payment, if, immediately
prior or after giving effect thereto (a) a Default or an Event of Default would
exist, (b) the Company's Annualized Operating Cash Flow Ratio for the Reference
Period would exceed 8.5 to 1, or (c) the aggregate amount of all Restricted
Payments made by the Company and its Restricted Subsidiaries, including such
proposed Restricted Payment (if not made in cash, then the fair market value of
any property used therefor, as determined in good faith by the Board of
Directors) from and after the Issue Date and on or prior to the date of such
Restricted Payment, shall exceed the sum of (i) the amount determined by
subtracting (x) 2.0 times the aggregate Consolidated Interest Expense of the
Company for the period (taken as one accounting period) from the Issue Date to
the last day of the last full fiscal quarter prior to the date of the proposed
Restricted Payment (the "Computation Period") from (y) Operating Cash Flow of
the Company for the Computation Period, plus (ii) the aggregate Net Proceeds
(other than with respect to the PCC Equity Contribution) received by the Company
from the sale (other than to a Subsidiary of the Company) of its Qualified
Capital Stock after the Issue Date and on or prior to the date of such
Restricted Payment, plus (iii) to the extent not otherwise included in clause
(i) or (ii), above, an amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from payments of dividends, repayments of
loans or advances, or other transfers of assets, in each case to the Company or
any Wholly Owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company and any Restricted
Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in clause (b)
or (c) of the immediately preceding paragraph will not prohibit (i) the use of
an aggregate of $10,000,000 for Restricted Payments not otherwise permitted by
this Section 4.04, (ii) the distribution of amounts to Holdings sufficient to
pay the scheduled interest or dividends, as applicable, owed by Holdings on the
Holdings Securities as such interest or dividends become due and payable and so
long as (A) Holdings is the direct Parent of the Company owning 100% of the
capital stock of the Company, and (B) such Holdings Securities contain no
scheduled requirement for the payment of cash interest or dividends, as
applicable, until at least five years from the date of their original issuance
and (iii) any dividend, distribution or other payment by any Restricted
Subsidiary on shares of its Capital Stock that is paid pro rata to all holders
of such Capital Stock, and notwithstanding the foregoing paragraph, the
provisions set forth in clause (a), (b)
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or (c) of the immediately preceding paragraph will not prohibit (iv) the payment
of any dividend within 60 days after the date of its declaration if such
dividend could have been made on the date of its declaration in compliance with
the foregoing provisions, or (v) the redemption, defeasance, repurchase or other
acquisition or retirement of any Indebtedness or Capital Stock of the Company or
its Restricted Subsidiaries either in exchange for or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of
Qualified Capital Stock (in the case of any redemption, defeasance, repurchase
or other acquisition or retirement of any Junior Indebtedness or Capital Stock
of the Company or its Restricted Subsidiaries) or Junior Indebtedness (in the
case of any redemption, defeasance, repurchase or other acquisition or
retirement of any Indebtedness of the Company or its Restricted Subsidiaries) of
the Company.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this Section 4.04, 100% of
the amounts expended under clauses (i) through (v) of the immediately preceding
paragraph shall be deducted.
None of the transactions described in Section 4.01(b) above, shall be
taken into account in any calculation under this Section 4.04.
SECTION 4.05. Corporate Existence. Subject to Article 5, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate or other existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of each of them and the rights (charter and statutory)
and corporate franchises of the Company and each of the Company's Restricted
Subsidiaries; provided, however, that the Company shall not be required to
preserve, with respect to itself, any right or franchise, and with respect to
any Restricted Subsidiaries of the Company, any such existence, right or
franchise, if (a) the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
such entity and (b) the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims. Except with respect to
immaterial items, the Company shall, and shall cause each of its Restricted
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges (including withholding taxes and any penalties, interest and additions
to taxes) levied or imposed upon the Company or any of its Restricted
Subsidiaries or any of their respective properties and assets and (ii) all
lawful claims, whether for labor, materials, supplies, services or anything
else, which have become due
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and payable and which by law have or may become a Lien upon the property and
assets of the Company or any of its Restricted Subsidiaries; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves have been
established in accordance with GAAP.
SECTION 4.07. Maintenance of Properties and Insurance. The Company
shall cause all material properties used or useful to the conduct of its
business and the business of each of its Restricted Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.07 shall prevent the Company from discontinuing any
operation or maintenance of any of such properties, or disposing of any of them,
if such discontinuance or disposal is (a), in the judgment of the Board of
Directors of the Company, desirable in the conduct of the business of such
entity and (b) not disadvantageous in any material respect to the Holders.
The Company shall provide, or cause to be provided, for itself and each
of its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company is adequate and appropriate for the conduct of the business of
the Company and such Restricted Subsidiaries in a prudent manner, with (except
for self-insurance) reputable insurers or with the government of the United
States of America or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in the reasonable,
good faith opinion of the Company and adequate and appropriate for the conduct
of the business of the Company and such Restricted Subsidiaries in a prudent
manner for entities similarly situated in the industry, unless failure to
provide such insurance (together with all other such failures) would not have a
material adverse effect on the financial condition or results of operations of
the Company or such Restricted Subsidiary.
SECTION 4.08. Compliance Certificate; Notice of Default. The Company
shall deliver to the Trustee within 120 days after the end of its fiscal year an
Officers' Certificate complying with Section 314(a)(4) of the TIA and stating
that a review of its activities and the activities of its Subsidiaries during
the preceding fiscal year has been made under the supervision of the signing
Officers with a
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view to determining whether the Company has kept, observed, performed and
fulfilled their obligations under this Indenture and further stating, as to each
such Officer signing such certificate, whether or not the signer knows of any
failure by the Company or any Subsidiary of the Company to comply with any
conditions or covenants in this Indenture and, if such signor does know of such
a failure to comply, the certificate shall describe such failure with
particularity. The Officers' Certificate shall also notify the Trustee should
the relevant fiscal year end on any date other than the current fiscal year end
date.
The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, promptly upon becoming aware of any Default, Event of
Default or fact which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, an Officers' Certificate specifying such
Default, Event of Default or fact and what action the Company is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to have
knowledge of any Default, any Event of Default or any such fact unless one of
its Trust Officers receives notice thereof from the Company or any of the
Holders.
SECTION 4.09. Reports. Whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and to each Holder and to prospective purchasers of
Securities identified to the Company by an Initial Purchaser, within 15 days
after it files or would have been required to file such with the SEC, annual and
quarterly financial statements substantially equivalent to financial statements
that the Company would have been required to file with the SEC if the Company
were subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required.
SECTION 4.10. Limitation on Status as Investment Company. The Company
shall not become, nor shall it permit any of its Restricted Subsidiaries to
become an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended), or otherwise become subject to regulation
under the Investment Company Act.
SECTION 4.11. Limitation on Transactions with Related Persons. The
Company will not, and will not permit any of its Restricted Subsidiaries or
Unrestricted Subsidiaries to, after the Issue Date, enter into any contract,
agreement, arrangement or transaction with any Related Person (each a "Related
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Person Transaction"), or any series of Related Person Transactions, except for
transactions made in good faith, the terms of which are (i) fair and reasonable
to the Company or such Subsidiary, as the case may be, and (ii) are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$1,000,000 must first be approved by a majority of the Board of Directors of the
Company who are disinterested in the subject matter of the transaction pursuant
to a Board Resolution, and (b) with respect to any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$5,000,000, the Company must first obtain a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
financial point of view of such transaction to the Company or such Subsidiary,
as the case may be.
Notwithstanding the foregoing, the following shall not constitute
Related Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement, or
transaction solely between or among the Company and any of its Restricted
Subsidiaries or between or among Restricted Subsidiaries of the Company, (iii)
any Restricted Payment of the type described by clauses (i) and (ii) of the
definition thereof made to all stockholders on a pro rata basis and not
prohibited by Section 4.04, (iv) any loan or advance by the Company or a
Restricted Subsidiary to employees of the Company or a Restricted Subsidiary in
the ordinary course of business, in an aggregate amount at any one time
outstanding not to exceed $500,000 and (v) any payment pursuant to a tax-sharing
agreement between the Company and any other Person with which the Company is
required or permitted to file a consolidated tax return or with which the
Company is or could be part of a consolidated group for tax purposes, which
payments are not in excess of the tax liabilities attributable solely to the
Company and its Restricted Subsidiaries (as a consolidated group).
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
after the Issue Date, directly or indirectly, issue, create, incur, assume,
guarantee or otherwise directly or indirectly become liable for (including as a
result of an
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acquisition), or otherwise become responsible for, contingently or otherwise
(individually or collectively, to "Incur" or, as appropriate, an "Incurrence"),
any Indebtedness. Neither the accrual of interest (including the issuance of
"pay in kind" securities or similar instruments in respect of such accrued
interest) pursuant to the terms of Indebtedness Incurred in compliance with this
covenant, nor the accretion of original issue discount, nor the mere extension
of the maturity of any Indebtedness shall be deemed to be an Incurrence of
Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may incur
Indebtedness if the Company's Annualized Operating Cash Flow Ratio, after giving
effect to the Incurrence of such Indebtedness, would have been less than 8
to 1.
In addition, if there exists no Default or Event of Default immediately
prior and subsequent thereto, the foregoing limitations will not apply to the
Incurrence of (i) Indebtedness by the Company or any of its Restricted
Subsidiaries constituting Existing Indebtedness, reduced by repayments of and
permanent reductions in commitments in satisfaction of the Net Cash Proceeds
application requirement set forth in Section 4.15 and by repayments and
permanent reductions in amounts outstanding pursuant to scheduled amortizations
and mandatory prepayments in accordance with the terms thereof, (ii)
Indebtedness, in an aggregate principal amount not in excess of $525,000,000,
permitted under the Credit Agreement, reduced by (a) repayments of and permanent
reductions in commitments in satisfaction of the Net Cash Proceeds application
requirement set forth in Section 4.15 and (b) an amount equal to the aggregate
amount of Indebtedness Incurred pursuant to clause (x), below, so long as such
amounts Incurred pursuant to clause (x) remain outstanding; provided that, if
there exists a Default or an Event of Default immediately prior or subsequent
thereto, the Company and its Restricted Subsidiaries may Incur Indebtedness
pursuant to this clause (ii) so long as the proceeds from such Incurrence are
not used directly to pay any amounts owing in respect of any Indebtedness,
including, without limitation, principal, interest and commitment fees, other
than with respect to the Notes and the Holdings Securities, (iii) Indebtedness
of the Company evidenced by the Securities, (iv)(A) Permitted Acquisition
Indebtedness by the Company that satisfies the provisions of clause (x) of the
definition thereof or (B) Permitted Acquisition Indebtedness by any Restricted
Subsidiary that satisfies the provisions of clause (y) of the definition
thereof, (v) Indebtedness between the Company and any Restricted Subsidiary of
the Company or between Restricted Subsidiaries of the Company, provided that, in
the case of Indebtedness of the Company, such obligations shall be unsecured and
subordinated in all respects to the Holders' rights pursuant to the Securities,
and the date of any event that causes
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a Restricted Subsidiary no longer to be a Restricted Subsidiary shall be an
Incurrence Date with respect to such Indebtedness, (vi) Capitalized Lease
Obligations and Purchase Money Indebtedness in an aggregate amount or aggregate
principal amount, as the case may be, outstanding at any time not to exceed in
the aggregate $15,000,000, provided that in the case of Purchase Money Indebt-
edness, such Indebtedness shall not constitute less than 75% nor more than 100%
of the cost (determined in accordance with GAAP) to the Company or such
Restricted Subsidiary of the property purchased or leased with the proceeds
thereof, (vii) Indebtedness of the Company or any Restricted Subsidiary arising
from agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in connection
with the disposition of any business, assets or Restricted Subsidiary of the
Company to the extent none of the foregoing results in the obligation to repay
an obligation for money borrowed by any Person and are limited in aggregate
amount to no greater than 10% of the fair market value of such business, assets
or Restricted Subsidiary so disposed of, (viii) any guarantee by any Restricted
Subsidiary of any Senior Indebtedness Incurred in compliance with this Section
4.12, (ix) Indebtedness of the Company or any Restricted Subsidiary under
standby letters of credit or reimbursement obligations with respect thereto
issued in the ordinary course of business and consistent with industry
practices limited in aggregate amount to $5,000,000 at any one time outstanding,
(x) Indebtedness of the Company (other than Indebtedness permitted by clauses
(i) through (ix) or (xi) hereof) not to exceed $100,000,000 at any one time
outstanding and (xi) Refinancing Indebted ness Incurred to extend, renew,
replace or refund Indebtedness permitted under clauses (i) (as so reduced in
amount), (ii) (as so reduced in amount), (iii), (iv) and (xi) of this paragraph.
Indebtedness of any Person that is not a Restricted Subsidiary of the
Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company shall be deemed to
have been Incurred, as the case may be, at the time such Person becomes such a
Restricted Subsidiary of the Company, or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company.
SECTION 4.13. Limitations on Restricting Subsidiary Dividends. The
Company will not, and will not permit any of its Restricted Subsidiaries to,
with respect to securities issued directly thereby or with respect to which they
are
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obligors, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to pay dividends or make other distributions on the
Capital Stock of any Restricted Subsidiary of the Company or pay or satisfy any
obligation to the Company or any of its Restricted Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Restricted Subsidiaries, except encumbrances and restrictions existing under (i)
the Indenture and the Securities, (ii) any Existing Indebtedness, (iii) the
Credit Agreement, (iv) any applicable law or any governmental or administrative
regulation or order, (v) Refinancing Indebtedness permitted under the Indenture,
provided that the restrictions contained in the instruments governing such
Refinancing Indebtedness are no more restrictive in the aggregate than those
contained in the instruments governing the Indebtedness being refinanced
immediately prior to such refinancing, (vi) restrictions with respect solely to
a Restricted Subsidiary of the Company imposed pursuant to a binding agreement
which has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Restricted Subsidiary, provided such
restrictions apply solely to the Capital Stock or assets being sold of such
Restricted Subsidiary, (vii) restrictions contained in any agreement relating to
the financing of the acquisition of a Person or real or tangible personal
property after the Issue Date which are not applicable to any Person or
property, other than the Person or property so acquired and which either (A)
were not put in place in anticipation of or in connection with such acquisition
or (B) constituted Permitted Acquisition Indebtedness of a Person satisfying the
provisions of clause (y) of the definition thereof or (viii) any agreement
(other than those referred to in clause (vii)) of a Person acquired by the
Company or a Restricted Subsidiary of the Company, which restrictions existed at
the time of acquisition and were not put in place in anticipation of or in
connection with such acquisition. Notwithstanding the foregoing, neither (a)
customary provisions restricting subletting or assignment of any lease entered
into the ordinary course of business, consistent with past practices nor (b)
Liens on assets securing Senior Indebtedness, shall in and of themselves be
considered a restriction on the ability of the applicable Restricted Subsidiary
to transfer such agreement or assets, as the case may be.
SECTION 4.14. Limitations on Layering of Indebtedness; Liens. The Company
will not incur or suffer to exist any Indebtedness that is subordinate in right
of payment to any other Indebtedness of the Company, unless, by its terms, such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the Securities. The Company will not and will not permit any Restricted
Subsidiary to, directly or indirectly, Incur, or suffer to exist any Lien (other
than Permitted Liens) upon any of its property or assets, whether now owned or
hereafter acquired.
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SECTION 4.15. Limitation on Asset Sales and Sales of Subsidiary Stock.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, after the Issue Date, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, businesses or assets, including by merger or
consolidation, and including any sale or other transfer or issuance of any
Capital Stock of any Restricted Subsidiary of the Company, whether by the
Company or a Restricted Subsidiary (an "Asset Sale"), unless (1)(a) within 360
days after the date of such Asset Sale, an amount equal to the Net Cash Proceeds
therefrom (the "Asset Sale Offer Amount") are applied to the optional redemption
of the Securities in accordance with the terms of Article 3 of this Indenture
and Paragraph 5(a) of the Securities and other Indebtedness of the Company
ranking on a parity with the Securities from time to time outstanding with
similar provisions requiring the Company to make an offer to purchase or to
redeem such Indebtedness with the proceeds from asset sales, pro rata in
proportion to the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) of the Securities and
such other Indebtedness then outstanding or to the repurchase of the Securities
and such other Indebtedness pursuant to an irrevocable, unconditional offer (pro
rata in proportion to the respective principal amounts (or accreted values in
the case of Indebtedness issued with an original issue discount) of the
Securities and such other Indebtedness then outstanding) (the "Asset Sale
Offer") to repurchase such Indebtedness at a purchase price (the "Asset Sale
Offer Price") of 100% of the principal amount thereof in the case of the
Securities or 100% of the principal amount of such other Indebtedness (or
accreted value in the case of Indebtedness issued with an original issue
discount) plus, in each case, accrued interest to the date of payment made
within 330 days of such Asset Sale, or (b) within 330 days of such Asset Sale,
the Asset Sale Offer Amount is (i) invested (or committed, pursuant to a binding
commitment subject only to reasonable, customary closing conditions, to be
invested, and in fact is so invested, within an additional 90 days) in tangible
assets and property (other than notes, obligations or securities), which in the
good faith reasonable judgment of the Board of Directors of the Company are of a
type used in a Related Business, or Capital Stock of a Person (which, if such
Person becomes a Subsidiary of the Company by virtue of such Asset Sale, shall
initially be designated a Restricted Subsidiary) all or substantially all of
whose assets and property (in the good faith reasonable judgment of the Board of
Directors of the Company) are of a type used in a Related Business (provided
that, with respect to such Capital Stock, all of the requirements of the last
proviso of clause (v) of the following paragraph shall have been satisfied) or
(ii) used to retire permanently Senior Indebtedness or Indebtedness of a
Restricted Subsidiary, (2) with respect to any transaction or related series of
transactions of securities, property or assets with an aggregate fair
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market value in excess of $1,000,000, at least 75% of the value of consideration
for the assets disposed of in such Asset Sale (excluding (a) Senior Indebtedness
(and any Refinancing Indebtedness issued to refinance any such Indebtedness) or
the Indebtedness of any Restricted Subsidiary assumed by a transferee which
assumption permanently reduces the amount of Indebtedness outstanding on the
Issue Date and permitted to have been Incurred pursuant to Section 4.12 (includ
ing that in the case of a revolver or similar arrangement that makes credit
available, such commitment is permanently reduced by such amount), (b) Pur chase
Money Indebtedness secured exclusively by the assets subject to such Asset Sale
which is assumed by a transferee and (c) marketable securities that are promptly
converted into cash or Cash Equivalents) consists of cash or Cash Equivalents,
provided that any cash or Cash Equivalents received within 12 months following
any such Asset Sale upon conversion of any property or assets (other than in the
form of cash or Cash Equivalents) received in consideration of such Asset Sale
shall be applied promptly in the manner required of Net Cash Proceeds of any
such Asset Sale as set forth above, (3) no Default or Event of De fault shall
occur or be continuing after giving effect to, on a pro forma basis, such Asset
Sale, unless such Asset Sale is in consideration solely of cash or Cash
Equivalents and such consideration is applied immediately to the permanent
reduction of the principal amount of Indebtedness outstanding pursuant to the
Credit Agreement, and (4) the Board of Directors of the Company determines in
good faith that the Company or such Restricted Subsidiary, as applicable, would
receive fair market value in consideration of such Asset Sale.
An Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds
from Asset Sales not applied to the uses set forth in (1)(b) above exceeds
$5,000,000 and each Asset Sale Offer shall remain open for 20 Business Days
following its commencement and no longer, except as otherwise required by
applicable law (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Company shall apply the Asset Sale Offer Amount, plus an
amount equal to accrued interest to the purchase of all Indebtedness properly
tendered (on a pro rata basis as described above if the Asset Sale Offer Amount
is insufficient to purchase all Indebtedness so tendered) at the Asset Sale
Offer Price (together with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course of
business;
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(ii) the Company and its Restricted Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with Section 5.01;
(iii) the Company and its Restricted Subsidiaries may sell or dispose
of damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Restricted Subsidiary, as
applicable;
(iv) the Company and its Restricted Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets to the Company or
any of its Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, upon receipt of a favorable written opinion by an independent
financial advisor of national reputation as to the fairness from a
financial point of view to the Company or such Restricted Subsidiary of the
proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or Capital
Stock of a Person all or substantially all of whose assets, are of a type
used in a Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of
the Company by virtue of such Asset Sale), or a combination of any such
property, businesses, or assets, or Capital Stock of such a Person and cash
or Cash Equivalents; provided that (i) there shall not exist immediately
prior or subsequent thereto a Default or an Event of Default, (ii) a
majority of the independent directors of the Board of Directors of the
Company shall have approved a resolution of the Board of Directors that
such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant to
any such exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the provisions of the
immediately preceding paragraph of this covenant; and provided, further,
that any Capital Stock of a Person received in an Asset Sale pursuant to
this clause (v) shall be owned directly by the Company or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person already
owned by the Company and its Restricted Subsidiaries, shall constitute a
majority of the voting power and Capital Stock of such Person, unless
(A)(i) the Company has received a binding commitment from such Person (or
the direct or indirect parent of such Person) that such
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Person (or the direct or indirect parent of such Person) will distribute to
the Company in cash an amount equal to the Company's Annualized Operating
Cash Flow (determined as of the date of such Asset Sale) attributable to
the property, business, or assets of the Company and its Restricted
Subsidiaries exchanged in connection with such Asset Sale during each
consecutive 12-month period subsequent to such Asset Sale (unless and until
the Company shall have sold all of such Capital Stock, provided that the
provisions of clause (B) below, if applicable, shall have been satisfied),
(ii) immediately after such Asset Sale the aggregate number of Net Pops of
the wireless communications systems in which the Company or any of its
Restricted Subsidiaries has ownership interests ("Company Systems") that
are owned directly by a Person or Persons a majority of whose voting power
and Capital Stock is owned directly or indirectly by the Company is no less
than 80% of the aggregate number of Net Pops of Company Systems immediately
prior to such Asset Sale and (iii) upon consummation of such Asset Sale, on
a pro forma basis, the ratio of such Person's Annualized Operating Cash
Flow to the product of Consolidated Interest Expense for the Reference
Period multiplied by four (but excluding from Consolidated Interest Expense
all amounts that are not required to be paid in cash on a current basis)
shall be at least 1 to 1, or (B) in the case of Capital Stock of a Person
that is not a Subsidiary of the Company owned by the Company or a
Restricted Subsidiary that is exchanged (the "Exchanged Capital Stock") for
Capital Stock of another Person all or substantially all of whose assets
are of a type used in a Related Business, either (i) the Exchanged Capital
Stock shall not have been acquired prior to such Asset Sale in reliance
upon clause (A) of this proviso or (ii) the requirements of subclauses
(A)(i) (based on the original guaranteed cash flow) and (A)(iii) shall be
satisfied with respect to any Capital Stock acquired in consideration of
the Exchanged Capital Stock.
Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to clause
(c) of Section 4.04, without giving effect to clause (i) of the second paragraph
thereof, shall not be deemed to be Asset Sales.
The Company shall accumulate all Net Cash Proceeds and the aggregate amount
of such accumulated Net Cash Proceeds not used for the purposes permitted and
within the time provided by this Section 4.15 is referred to as the "Accumulated
Amount."
For purposes of this Section 4.15, "Minimum Accumulation Date" means each
date on which the Accumulated Amount exceeds $5,000,000. Not later than
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10 Business Days after each Minimum Accumulation Date, the Company will commence
an Asset Sale Offer to the Holders and holders of other Indebtedness of the
Company ranking pari passu in right of payment with the Securities from time to
time outstanding with similar provisions requiring the Company to make an offer
to purchase or to redeem such Indebtedness with the proceeds from asset sales to
purchase, on a pro rata basis in proportion to the respective principal amounts
(or accreted values in the case of Indebtedness issued with an original issue
discount) of the Securities and such other Indebtedness then outstanding, for
cash, Securities and such other Indebtedness that will have an aggregate
principal amount (and accreted value, as applicable) (the "Asset Sale Offer
Amount") on the purchase date equal to the Accumulated Amount, at a purchase
price equal to the Asset Sale Offer Price, plus accrued but unpaid interest, if
any, to, and including, the date of purchase (the "Asset Sale Purchase Date"),
which date shall be no later than 30 Business Days after the first date on which
the Asset Sale Offer is required to be made. Notice of an Asset Sale Offer will
be sent 20 Business Days prior to the close of business on the earlier of (a)
the third Business Day prior to the Asset Sale Purchase Date and (b) the third
Business Day following the expiration of the Asset Sale Offer (such earlier date
being the "Final Put Date"), by first-class mail, by the Company to each Holder
at its registered address, with a copy to the Trustee. The notice to the Holders
will contain all information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender Securities
pursuant to the Asset Sale Offer. The notice to Holders, which (to the extent
consistent with the Indenture) shall govern the terms of the Asset Sale Offer,
shall state:
(1) that the Asset Sale Offer is being made pursuant to
such notice and this Section 4.15;
(2) the Asset Sale Offer Amount, the Asset Sale Offer
Price (including the amount of accrued and unpaid interest), the
Final Put Date, and the Asset Sale Purchase Date, which Asset
Sale Purchase Date shall be on or prior to 40 Business Days
following the Minimum Accumulation Date;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing cash
with the Paying Agent in accordance with the penultimate
paragraph of this Section 4.15 or such
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payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest after the Asset Sale Purchase
Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be
required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent (which may not for
purposes of this Section 4.15, notwithstanding anything this
Indenture to the contrary, be the Company or any Affiliate of
the Company) at the address specified in the notice prior to the
close of business on the Final Put Date;
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent (which may
not for purposes of this Section, notwithstanding any other
provision of this Indenture, be the Company or any Affiliate of
the Company) receives, up to the close of business on the Final
Put Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of
the Securities the Holder is withdrawing and a statement that
such Holder is withdrawing his election to have such principal
amount of Securities purchased;
(7) that if Indebtedness in a principal amount in excess
of the principal amount of Securities to be acquired pursuant to
the Asset Sale Offer is tendered and not withdrawn, the Company
shall purchase Indebtedness on a pro rata basis in proportion to
the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) thereof
(with such adjustments as may be deemed appropriate by the
Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities were purchased only in
part will be issued new Securities equal in principal
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amount to the unpurchased portion of the Securities surrendered;
and
(9) a brief description of the circumstances and relevant
facts regarding such Asset Sales.
Any such Asset Sale Offer shall comply with all applicable provisions of
applicable Federal and state laws, rules and regulations, including those
regulating tender offers, if applicable, and any provisions of this Indenture
that conflict with such laws shall be deemed to be superseded by the provisions
of such laws.
On or before an Asset Sale Purchase Date, the Company shall (i) accept for
payment Securities or portions thereof properly tendered and not properly
withdrawn pursuant to the Asset Sale Offer on or before the Final Put Date (on a
pro rata basis if required pursuant to paragraph (7) hereof), (ii) deposit with
the Paying Agent cash sufficient to pay the Asset Sale Offer Price for all
Securities or portions thereof so tendered and accepted and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the Securities or portions thereof being purchased by the Company. The Paying
Agent shall on each Asset Sale Purchase Date mail or deliver to Holders of
Securities so accepted payment in an amount equal to the Asset Sale Offer Price
for such Securities, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any Security not so accepted
shall be promptly mailed or delivered by the Company to the Holder thereof.
If the amount required to acquire all Indebtedness properly tendered by
Holders pursuant to the Asset Sale Offer (the "Acceptance Amount") made pursuant
to this Section 4.15 is less than the Asset Sale Offer Amount, the excess of the
Asset Sale Offer Amount over the Acceptance Amount may be used by the Company
for general corporate purposes without restriction, unless otherwise restricted
by the other provisions of the Indenture. Upon consummation of any Asset Sale
Offer made in accordance with the terms of the Indenture, the Accumulated Amount
will be reduced to zero irrespective of the amount of Indebtedness tendered
pursuant to the Asset Sale Offer.
SECTION 4.16. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of, premium of, or interest on the Securities as contemplated herein,
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wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.17. Rule 144A Information Requirement. The Company shall
furnish to the Holders of the Securities and prospective purchasers of
Securities designated by the Holders of Transfer Restricted Securities, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act until such time as the Company either
concluded an offer to exchange the Exchange Securities for the Initial
Securities or a registration statement relating to resales of the Securities has
become effective under the Securities Act. The Company shall also furnish such
information during the pendency of any suspension of effectiveness of the resale
registration statement.
SECTION 4.18. Limitation on Lines of Business. The Company shall not, nor
shall it permit any of its Restricted Subsidiaries to, directly or indirectly
engage in any line or lines of business activity other than that which, in the
reasonable, good faith judgment of the Board of Directors of the Company, is a
Related Business.
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock. The
Company will not sell, and will not permit any of its Restricted Subsidiaries to
issue or sell, any shares of Capital Stock of any Restricted Subsidiary of the
Company to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company, except for shares of common stock with no preferences
or special rights or privileges and with no redemption or prepayment provisions
("Special Rights"); provided that, in the case of a Restricted Subsidiary that
is a partnership or joint venture partnership (a "Restricted Partnership") the
Company or any of its Restricted Subsidiaries may sell or such Restricted
Partnership may issue or sell Capital Stock of such Restricted Partnership with
Special Rights no more favorable than those held by the Company or such
Restricted Subsidiary in such Restricted Partnership.
SECTION 4.20. Deposit of Proceeds with Trustee Pending Consummation of the
Merger.
On the Issue Date, the Company shall pay to the Trustee for deposit in the
Collateral Account the net proceeds from the issuance of the Securities (the
"Net Offering Proceeds") and such additional amount as, when added to the Net
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Offering Proceeds, equals $186,517,187.50, representing 101% of the aggregate
principal amount of the Securities plus the interest that would accrue up to and
including December 31, 1997 were all $175,000,000 aggregate principal amount of
the Securities to be outstanding from the Issue Date to such date (the "Special
Redemption Amount"), as set forth in Article 10.
ARTICLE 5
Successor Corporation
SECTION 5.01. Limitation on Merger, Sale or Consolidation. (a) The
Company will not consolidate with or merge with or into another Person or sell,
lease, convey, transfer or otherwise dispose of all or substantially all of its
assets (computed on a consolidated basis), whether in a single transaction or a
series of related transactions, to another Person or group of affiliated
Persons, unless (i) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Securities and the Indenture; (ii) no Default or
Event of Default shall exist or shall occur immediately after giving effect on a
pro forma basis to such transaction; (iii) (A) immediately after giving effect
to such transaction on a pro forma basis, the consolidated resulting, surviving
or transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash Flow
Ratio provision set forth in the second paragraph of Section 4.12 or (B), if the
requirement of clause (A) is not satisfied, (x) any Indebtedness of the
resulting surviving or transferee entity in excess of the amount of the
Company's Indebtedness immediately prior to such transaction is Permitted
Acquisition Indebtedness and (y) the requirement of clause (A) is not satisfied
solely due to the Incurrence of such Permitted Acquisition Indebtedness; and
(iv) the Company shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, if applicable, confirming compliance with the
requirements of this Section 5.01.
(b) For purposes of clause (a), the sale, lease, conveyance, assignment,
transfer, or other disposition of all or substantially all of the properties and
assets of one or more Restricted Subsidiaries of the Company, which properties
and assets, if held by the Company instead of such Restricted Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
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SECTION 5.02. Successor Corporation Substituted. Upon any consolidation or
merger or any transfer of all or substantially all of the assets of the Company
in accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture with the same effect as if such
successor corporation had been named therein as the Company, and when a
successor corporation duly assumes all of the obligations of the Company
pursuant hereto and pursuant to the Securities, the predecessor shall be
released from such obligations.
ARTICLE 6
Events of Default and Remedies
SECTION 6.01. Events of Default.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay any installment of interest on the Securities as and
when the same becomes due and payable, and the continuance of such failure for a
period of 30 days;
(b) failure to pay all or any part of the principal of, or premium, if
any, on the Securities when and as the same becomes due and payable at maturity,
redemption, by acceleration, or otherwise, including, without limitation,
payment of the Change of Control Purchase Price in accordance with Article 11 or
the Asset Sale Offer Price in accordance with Section 4.15;
(c) failure by the Company to observe or perform any covenant, agreement
or warranty contained in the Securities or this Indenture (other than a default
in the performance of any covenant, agreement or warranty which is specifically
dealt with elsewhere in this Section 6.01), or failure by the Company to cause
each Unrestricted Subsidiary to comply with clause (c) of the definition of
"Unrestricted Subsidiary," and continuance of such failure for a period of 30
days after (subject to the following paragraph) there has been given, by
registered
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or certified mail, to the Company by the Trustee, or to the Company and the
Trustee by Holders of at least 25% in aggregate principal amount of the
outstanding Securities, a written notice specifying such default or breach,
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder;
(d) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount of any
Indebtedness of the Company or any Restricted Subsidiary of the Company or the
acceleration of the final stated maturity of any Indebtedness if the aggregate
principal amount of such Indebtedness together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, aggregates $15,000,000 or more at any
time;
(e) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its Significant
Restricted Subsidiaries as bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization of the Company or any of its Significant
Restricted Subsidiaries under any bankruptcy or similar law, and such decree or
order shall have continued undischarged and unstayed for a period of 60 days; or
a decree or order of a court of competent jurisdiction over the appointment of a
receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of the
Company, any of its Significant Restricted Subsidiaries, or of the property of
any such Person, or for the winding up or liquidation of the affairs of any such
Person, shall have been entered, and such decree, judgment, or order shall have
remained in force undischarged and unstayed for a period of 60 days;
(f) the Company or any of its Significant Restricted Subsidiaries shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any of its assets or property, or
shall make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fails generally to
pay its debts as they become due, or takes any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing; or
(g) final unsatisfied judgments not covered by insurance, or the issuance
of any warrant of attachment against any portion of the property or assets of
the
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Company or any of its Restricted Subsidiaries, aggregating in excess of
$5,000,000 at any one time rendered against the Company or any of its Restricted
Subsidiaries and not stayed, bonded or discharged for a period (during which
execution shall not be effectively stayed) of 60 days (or, in the case of any
such final judgment which provides for payment over time, which shall so remain
unstayed, unbonded or undischarged beyond any applicable payment date provided
therein).
If a Default occurs and is continuing, the Trustee must, within 90 days
after the occurrence of such default, give to the Holders notice of such
default.
SECTION 6.02. Acceleration of Maturity Date; Rescission and Annulment. If
an Event of Default (other than an Event of Default specified in Section 6.01(e)
or (f) relating to the Company or any of its Restricted Subsidiaries) occurs and
is continuing, then, and in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of then outstanding
Securities, by notice in writing to the Company (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all of the principal of the
Securities (or the Change of Control Purchase Price if the Event of Default
includes failure to pay the Change of Control Purchase Price), determined as set
forth below, including in each case accrued interest thereon, to be due and
payable and the same (i) shall become immediately due and payable or (ii) if
there are any amounts outstanding under the Credit Agreement and the Company has
guaranteed the repayment of principal and interest on the Credit Agreement,
shall become immediately due and payable upon the first to occur of an
acceleration under the Credit Agreement or five business days after receipt by
the Company and the representative of the holders of the Indebtedness under the
Credit Agreement of the Acceleration Notice, but only if such Event of Default
is then continuing. If an Event of Default specified in Section 6.01(e) or (f)
relating to the Company or any Significant Restricted Subsidiary occurs, all
principal (or the Change of Control Purchase Price, as applicable) and accrued
interest thereon will be immediately due and payable on all outstanding
Securities without any declaration or other act on the part of Trustee or the
Holders.
At any time after such a declaration of acceleration being made and before
a judgment or decree for payment of the money due has been obtained by the
Trustee as hereinafter provided in this Article 6, the Holders of a majority in
aggregate principal amount of then outstanding Securities, by written notice to
the Company and the Trustee, may rescind, on behalf of all Holders, any such
declaration of acceleration if:
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(1) the Company has paid or deposited with the Trustee
cash sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of (and premium, if any, applicable
to) any Securities which would become due otherwise than by
such declaration of acceleration, and interest thereon at
the rate borne by the Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Securities,
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and
(2) all Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on Securities
which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section
6.12, including, if applicable, any Event of Default relating to
the covenants contained in Section 11.01.
Notwithstanding the previous sentence of this Section 6.02, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event. No such waiver shall cure or waive any subsequent default or impair any
right consequent thereon.
In the event of a declaration of acceleration of the Securities because an
Event of Default has occurred and is continuing as a result of the acceleration
of any Indebtedness described in Section 6.01(d), the declaration of
acceleration of the Securities shall be automatically annulled if the holders of
all Indebtedness described in Section 6.01(d) (without any payment of any
holders of any such
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Indebtedness) have rescinded the declaration of acceleration in respect of such
Indebtedness within 30 days of the date of such declaration and if (i) the
annulment of the acceleration of the Securities would not conflict with any
judgment or decree of a court of competent jurisdiction and (ii) all Events of
Default, except nonpayment of principal or interest on the Securities that
became due solely because of the acceleration of the Securities, have been cured
or waived.
SECTION 6.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Company covenants that if an Event of Default in payment of
principal, premium, or interest specified in clause (a) or (b) of Section 6.01
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the reasonable costs and expenses
of collection, including compensation to, and expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.04. Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the
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principal of the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the Trustee shall
have made any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding or
otherwise to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole
amount of principal (and premium, if any) and
interest owing and unpaid in respect of the
Securities and to file such other papers or documents
as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel) and
of the Holders allowed in such judicial proceeding,
and
(2) to collect and receive any moneys or other
property payable or deliverable on any such claims
and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.05. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel,
be for the
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ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 6.06. Priorities. Any money collected by the Trustee pursuant
to this Article 6 shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such money on account
of principal, premium (if any) or interest, upon presentation of the Securities
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.07;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any) and interest,
respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
SECTION 6.07. Limitation on Suits. No Holder of any Security shall have
any right to order or direct the Trustee to institute any proceeding, judicial
or otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
(A) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount
of then outstanding Securities shall have made written request
to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses
and liabilities to be incurred or reasonably probable to be
incurred in compliance with such request;
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(D) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(E) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by the
Holders of a majority in principal amount of the outstanding
Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision of this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of, and premium (if any) and
accrued interest on, such Security on the Maturity Date of such payments as
expressed in such Security (in the case of redemption, the Redemption Price on
the applicable Redemption Date, in the case of the Change of Control Payment, on
the applicable Change of Control Payment Date, and, in the case of an Asset Sale
Offer, the Asset Sale Offer Price on the Asset Sale Purchase Date) and to
institute suit for the enforcement of any such payment after such respective
dates, and such rights shall not be impaired without the consent of such Holder.
SECTION 6.09. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in Section 2.07, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver. No delay or omission by the
Trustee or by any Holder of any Security to exercise any right or remedy arising
upon any Event of Default shall impair the exercise of any such right or remedy
or constitute a waiver of any such Event of Default. Every right and remedy
given by this Article 6 or by law to the Trustee or to the Holders may be
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exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 6.11. Control by Holders. The Holder or Holders of a majority
in aggregate principal amount of then outstanding Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred upon the
Trustee, provided that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture,
(2) the Trustee shall not determine that the
action so directed would be unjustly prejudicial to
the Holders not taking part in such direction, and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with
such direction.
SECTION 6.12. Waiver of past Default. Subject to Section 6.08, the
Holder or Holders of not less than a majority in aggregate principal amount of
the outstanding Securities may, on behalf of all Holders, prior to the
declaration of the acceleration of the maturity of the Securities, waive any
past default hereunder and its consequences, except a default
(A) in the payment of the principal of, premium, if any,
or interest on, any Security as specified in clauses (a) and
(b) of Section 6.01, or
(B) in respect of a covenant or provision hereof which,
under Article 9, cannot be modified or amended without the
consent of the Holder of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the
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enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted to be taken by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 6.13 shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for
enforcement of the payment of principal of, or premium (if any) or interest on,
any Security on or after the Maturity Date expressed in such Security
(including, in the case of redemption, on or after the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then and in
every case, subject to any determination in such proceeding, the Company, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 7.01. Duties of Trustee. (a) If a Default or an Event of
Default has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or
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obligations shall be implied in or read into this Indenture which are
adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any assets received
by it except as the Trustee may agree in writing with the Company. Assets held
in trust by the Trustee need not be segregated from other assets except to the
extent required by law.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
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(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 13.04 and 13.05. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee will not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(e) The Trustee will not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(f) The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(h) The Trustee shall have no duty to inquire as to the performance of
the covenants in Article 4 hereof. In addition, the Trustee shall not be deemed
to have knowledge of any Default or Event of Default except (i) any Event of
Default occurring pursuant to Sections 6.01(a), 6.01(b) and 4.02, or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
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SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or any of the Company's Subsidiaries, or
their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no representation
as to the validity or adequacy of this Indenture or the Securities and it shall
not be accountable for the Company's use of the proceeds from the Securities,
and it shall not be responsible for any statement in the Securities, other than
the Trustee's certificate of authentication, or the use or application of any
funds received by a Paying Agent other than the Trustee.
SECTION 7.05. Notice of Default. If a Default or an Event of Default
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder notice of the uncured Default or Event of Default
within 90 days after such Default or Event of Default occurs. Except in the case
of a Default or an Event of Default in payment of principal (or premium, if any)
of, or interest on, any Security (including the payment of the Change of Control
Purchase Price on the Change of Control Payment Date, the payment of the
Redemption Price on the Redemption Date and the payment of the Offer Price on
the Purchase Date), the Trustee may withhold the notice if and so long as a
Trust Officer in good faith determines that withholding the notice is in the
interest of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each
February 15 beginning with the February 15 following the date of this Indenture,
the Trustee shall, if required by law, mail to each Securityholder a brief
report dated as of such February 15 that complies with TIA (S) 313(a). The
Trustee also shall comply with TIA (S)(S) 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 7.07. Compensation and Indemnity. The Company agrees to pay
to the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
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trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable disbursements, expenses and advances incurred or made
by it. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents, accountants, experts and counsel.
The Company agrees to indemnify the Trustee (in its capacity as
Trustee) and each of its officers, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liability incurred by it without negligence or bad
faith on its part, arising out of or in connection with the administration of
this trust and its rights or duties hereunder including the reasonable costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company shall defend the claim and
the Trustee shall provide reasonable cooperation at the Company's expense in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel; provided that the Company will not
be required to pay such fees and expenses if they assume the Trustee's defense
and there is no conflict of interest between the Company and the Trustee in
connection with such defense. The Company need not pay for any settlement made
without their written consent. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest on particular
Securities, including, without limitation, assets held in the Collateral
Account.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.07 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article 8 of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
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SECTION 7.08. Replacement of Trustee. The Trustee may resign by so
notifying the Company in writing. The Holder or Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge of
the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the trustee provided for in Section 7.07
have been paid, the retiring Trustee shall transfer all property held by it as
trustee (including the Collateral Account) to the successor Trustee, subject to
the lien provided in Section 7.07, the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
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Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee
shall have a combined capital and surplus of at least $10,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA (S) 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA (S). 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option at any time, elect to have Section 8.02 or
Section 8.03 applied to all outstanding Securities upon compliance with the
conditions set forth below in this Article 8.
SECTION 8.02. Legal Defeasance and Discharge. Upon the Company's
exercise under Section 8.01 of the option applicable to this Section 8.02, the
Company shall be deemed to have been discharged from its obligations with
respect to all outstanding Securities on the date the conditions set forth below
are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute
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proper instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Securities to receive solely from the trust fund
described in Section 8.04, and as more fully set forth in such Section 8.04,
payments in respect of the principal of, premium, if any, and interest on such
Securities when such payments are due, (b) the Company's obligations with
respect to such Securities under Sections 2.04, 2.06, 2.07, 2.10 and 4.03, (c)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Company's obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 with respect to the Securities.
SECTION 8.03. Covenant Defeasance. Upon the Company's exercise under
Section 8.01 of the option applicable to this Section 8.03, the Company shall be
released from its obligations under the covenants contained in Sections 4.04,
4.06, 4.07, 4.08, 4.09, 4.11, 4.12, 4.13, 4.14, 4.15, 4.18, 4.19 and Article 5
(other than the obligation of any successor to assume the obligations of the
Company hereunder) with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Securities, the Company need not comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document, but, except as specified
above, the remainder of this Indenture and such Securities shall be unaffected
thereby.
SECTION 8.04. Conditions to Legal or Covenant Defeasance. The
following shall be the conditions to the application of either Section 8.02 or
Section 8.03 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article 8
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit
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of the Holders of such Securities, (a) cash, or (b) U.S. Government Obligations
or U.S. Legal Tender Equivalents, or (c) a combination thereof, in such amounts,
as in each case will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge (i)
the principal of, premium, if any, and interest on the outstanding Securities on
the Stated Maturity or on the applicable Redemption Date, as the case may be, of
such principal or installment of principal, premium, if any, or interest and the
Holders of Securities shall have a valid, perfected, exclusive security interest
in the assets of such trust; provided that the Trustee shall have been
irrevocably instructed to apply such cash and the proceeds of such U.S.
Government Obligations or U.S. Legal Tender Equivalents to said payments with
respect to the Securities;
(b) In the case of an election under Section 8.02, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably satisfactory to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to such Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to Federal income tax in the same amount, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or, in so far
as Section 6.01(e) or 6.01(f) is concerned, at any time during the period ending
on the 91st day after the date of such deposit (it being understood that this
condition is a condition subsequent which shall not be deemed satisfied until
the expiration of such period, but in the case of Covenant Defeasance, the
covenants which are defeased under Section 8.03 will cease to be in effect
unless an Event of Default under Section 6.01(e) or 6.01(f) occurs during such
period);
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(e) Such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of the
Company's Subsidiaries is a party or by which any of them is bound;
(f) In the case of an election under either Section 8.02 or 8.03, the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.02
or 8.03 was not made by the Company with the intent of preferring the Holders
over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for or relating to
either the Legal Defeasance under Section or the Covenant Defeasance under
Section 8.03 (as the case may be) have been complied with as contemplated by
this Section 8.04.
SECTION 8.05. Deposited U.S. Legal Tender Equivalents and U.S.
Government Obligations to be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.06, all cash, U.S. Legal Tender Equivalents and U.S.
Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 in respect of the outstanding
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.06. Repayment to the Company. Subject to any applicable
escheat or abandoned property laws, any money deposited with the Trustee or any
Paying Agent, or then held by the Company, in trust for the payment of the
principal of, premium, if any, or interest on any Security and remaining
unclaimed for two years after such principal, and premium, if any, or interest
has become due and payable shall be paid to the Company on its request; and the
Holder of such Security shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease.
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SECTION 8.07. Reinstatement. If the Trustee or Paying Agent is unable
to apply any cash, U.S. Legal Tender Equivalents or U.S. Government Obligations
in accordance with Section 8.02 or 8.03, as the case may be, by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the Company's obligations under
this Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the
Trustee or Paying Agent is permitted to apply such money in accordance with
Sections 8.02 and 8.03, as the case may be; provided, however, that, if the
Company makes any payment of principal of, premium, if any, or interest on any
Security following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the cash held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to cure any ambiguity, defect, or
inconsistency, or to make any other provisions with
respect to matters or questions arising under this
Indenture which shall not be inconsistent with the
provisions of this Indenture, provided such action
pursuant to this clause (1) shall not adversely
affect the interests of any Holder in any respect;
(2) to add to the covenants of the Company for
the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company or to make
any other change that does not adversely affect the
rights of any Holder, provided that the Company has
delivered to the Trustee an Opinion of Counsel
stating that such change does not adversely affect
the rights of any Holder;
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(3) to provide for collateral or guarantors for
the Securities;
(4) to evidence the succession of another Person
to the Company, and the assumption by any such
successor of the obligations of the Company, herein
and in the Securities in accordance with Article 5;
(5) to comply with the TIA; or
(6) to provide for the issuance and
authorization of the Exchange Securities.
SECTION 9.02. Amendments, Supplemental Indentures and Waivers with
Consent of Holders. Subject to Section 6.08, with the consent of the Holders of
not less than a majority in aggregate principal amount of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolutions, and the Trustee may
amend or supplement this Indenture or the Securities or enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
the Securities or of modifying in any manner the rights of the Holders under
this Indenture or the Securities. Subject to Section 6.08, the Holder or Holders
of not less than a majority, in principal amount of then outstanding Securities
may waive compliance by the Company with any provision of this Indenture or the
Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall, without the consent of the Holder of
each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of
Securities whose Holders must consent to an
amendment, supplement or waiver of any provision of
this Indenture or the Securities;
(2) reduce the rate or extend the time for
payment of interest on any Security;
(3) reduce the principal amount of any Security,
the Change of Control Purchase Price, the Asset Sale
Offer Price or the Redemption Price;
(4) change the Stated Maturity of any Security;
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(5) alter the security provisions of Section
4.20 or the redemption provisions of Article 3 or
paragraph 5 of the Securities or the terms or
provisions of Section 4.15 or the terms or provisions
of Article 11, in any case, in a manner adverse to
any Holder;
(6) make any changes in the provisions
concerning waivers of Defaults or Events of Default
by Holders of the Securities or the rights of Holders
to recover the principal or premium of, interest on,
or redemption payment with respect to, any Security,
including without limitation any changes in Section
6.08, 6.12 or this third sentence of this Section
9.02;
(7) make the principal of, or the interest on,
any Security payable with anything or in any manner
other than as provided for in this Indenture
(including changing the place of payment where, or
the coin or currency in which, any Security or any
premium or the interest thereon is payable) and the
Securities as in effect on the date hereof; or
(8) make the Securities subordinated in right of
payment to any extent or under any circumstances to
any other indebtedness.
With the consent of Holders of two-thirds of the outstanding aggregate
principal amount of the Securities, the Company and the Trustee may change the
Change of Control Purchase Date and the Asset Sale Offer Period.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
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After an amendment, supplement or waiver under this Section 9.02 or
Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article 9, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.03. Compliance with TIA. Every amendment, waiver or
supplement of this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents. Until an amendment,
waiver or supplement becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his Security
or portion of his Security by written notice to the Company or the Person
designated by the Company as the Person to whom consents should be sent if such
revocation is received by the Company or such Person before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the
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same debt as the consenting Holder's Security; provided that any such waiver
shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Security, on or after the respective
dates set for such amounts to become due and payable expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment,
supplement or waiver changes the terms of a Security, the Trustee may require
the Holder of the Security to deliver it to the Trustee or require the Holder to
put an appropriate notation on the Security. The Trustee may place an
appropriate notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Any failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, Etc. The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
9; provided that the Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture. The Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article 9 is authorized or permitted by this Indenture.
ARTICLE 10
COLLATERAL ACCOUNT AND RELEASES
SECTION 10.01. Collateral Account.
(a) Prior to the Issue Date of the Securities, the Trustee shall open
with Harris Trust and Savings Bank (the "Bank") and shall require the Bank to
establish on its books and maintain, a trust account (the "Collateral Account")
into which the Trustee shall deposit the Special Redemption Amount when received
from the Company pursuant to Section 4.20. In order to secure the full and
punctual payment of the Securities in accordance with the terms hereof (but
subject to the provisions of this Article 10 governing release of funds held in
the Collateral Account), the Company hereby grants to the Trustee a continuing
security interest in and to all of its right, title and interest in and to the
Collateral
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Account, all cash deposited therein and the Treasury Bills held therein pursuant
to Section 10.02 and all proceeds of any of the foregoing, whether now existing
or hereafter acquired or arising. The Collateral Account shall relate solely to
the Securities and the Collateral securing the Securities, and funds in such
account shall not be commingled with any other moneys or properties, tangible or
intangible. All payments to be made from time to time by the Trustee to the
Holders of Securities out of funds in the Collateral Account as payment of the
Redemption Price in connection with a Special Redemption shall be made by the
Trustee as Paying Agent. All moneys deposited from time to time in the
Collateral Account pursuant to this Indenture shall be held by the Trustee in
trust hereunder as Collateral as herein provided. Any payments of principal of
or interest on, or proceeds from the sale of, Treasury Bills held in the
Collateral Account shall be credited and deposited into the Collateral Account.
The Collateral Account shall be titled "Bank of Montreal Trust Company, Trustee
for benefit of holders of securities of Price Communications Wireless, Inc.,
under an Indenture dated July 10, 1997 Collateral Account."
(b) The Collateral Account shall be maintained with the Bank until
release by the Trustee contemporaneously with the earliest of (i), (ii) or (iii)
of this subparagraph (b) to occur: (i)(A) the closing of the Merger, (B) the
borrowing by the Company of an aggregate of at least $325.0 million pursuant to
the Credit Agreement and (C) the receipt by the Company of the PCC Equity
Contribution, and (D) receipt by the Trustee of an order from the Company
requesting that the Trustee release the Collateral to the order of the Company;
or (ii) the Business Day prior to the Special Redemption Date or (iii) the date
of which no Securities remain outstanding.
SECTION 10.02. Eligible Investments. Upon order from the Company, the
Trustee shall invest any funds in the Collateral Account in Treasury Bills,
provided that;
(a) any such investment and the proceeds therefrom are held through
the Collateral Account, and
(b) concurrently with making such investment, the Trustee ensures
that (i) the Bank credits the Treasury Bills to the Collateral
Account and (ii) the Bank causes a corresponding position to be
credited to its securities account (A) at the Federal Reserve
Bank of New York or (B) at a securities intermediary (as defined
in 31 C.F.R.(S)357.2) that has a Participant's Securities
Account with the Federal Reserve Bank of New York and also
credited to such Participant's Securities Account, in each case
pursuant to Treasury Regulations and the New
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York Uniform Commercial Code (the "UCC"), to the extent such
laws are applicable.
The Trustee shall not be liable for any loss incurred on any funds
invested in Treasury Bills pursuant to the provisions of this Section 10.02.
SECTION 10.03. Release of Collateral.
Upon order from the Company to the Trustee pursuant to clause (i) of
Section 10.01(b), all properties in the Collateral Account shall be released to
the Company and the security interests in the Collateral created under Section
10.01 shall terminate; and upon the Special Redemption, the Trustee shall apply
all funds in the Collateral Account (i) first, to pay the Redemption Price on
the Special Redemption Date in respect of the Special Redemption and (ii)
immediately after the Special Redemption Date, to return any remaining funds in
the Collateral Account to the Company. The Trustee, when required by the
provisions of the foregoing sentence, shall execute instruments to release the
Collateral from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances which are not inconsistent with
the provisions of this Indenture, and shall have the power to effect any sale of
the Treasury Bills or any portion thereof at such time. The Trustee shall not be
liable for any loss incurred upon the sale of Treasury Bills prior to maturity
in accordance with this Section and Section 3.06. No party relying upon an
instrument executed by the Trustee as provided in this Article 10 shall be bound
to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
ARTICLE 11
RIGHT TO REQUIRE REPURCHASE
SECTION 11.01. Repurchase of Securities at Option of the Holder Upon a
Change of Control.
(a) In the event that a Change of Control occurs, each Holder will
have the right, at such Holder's option, to require the Company to repurchase
all or any part of such Holder's Securities (provided that the principal amount
of such Securities at stated maturity must be $1,000 or an integral multiple
thereof) pursuant to an unconditional, irrevocable offer by the Company (the
"Change of Control Offer") on a date that is no later than 45 Business Days
after the occurrence of such Change of Control (the "Change of Control Purchase
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Date"), at a cash price (the "Change of Control Purchase Price") equal to 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, to and including the Change of Control Purchase Date.
(b) Prior to the commencement of a Change of Control Offer, but in any
event within 30 days following any Change of Control, the Company covenants to,
if at such time the terms of the Credit Agreement require repayment upon a
Change of Control, (i) repay in full and terminate all commitments and
Indebtedness under the Credit Agreement or, (ii)(A) offer to repay in full and
terminate all commitments and Indebtedness under the Credit Agreement and (B)
repay the Indebtedness owed to each such lender that has accepted such offer or
(iii) obtain the requisite consents under the Credit Agreement to waive the
provisions of this sentence. The Company's failure to comply with the preceding
sentence shall constitute an Event of Default described in Section 6.01(c) and
not in Section 6.01(b).
(c) In the event that, pursuant to this Section 11.01, the Company
shall be required to commence a Change of Control Offer, the Company shall
follow the procedures set forth in this Section 11.01 as follows:
(1) the Change of Control Offer shall commence within 20 Business
Days following the Change of Control date;
(2) the Change of Control Offer shall remain open for 20 Business
Days, except to the extent that a longer period is required by
applicable law (the "Change of Control Offer Period");
(3) upon the expiration of a Change of Control Offer Period, the
Company shall purchase all of the properly tendered and not properly
withdrawn Securities in response to the Change of Control Offer;
(4) the Company shall provide the Trustee with notice of the
Change of Control Offer at least 5 Business Days before the
commencement of any Change of Control Offer; and
(5) on or before the commencement of any Change of Control Offer,
the Company or the Trustee (upon the request and at the expense of the
Company) shall send, by first-class mail, a notice to each of the
Securityholders, which (to the extent consistent with this Indenture)
shall govern the terms of the Change of Control Offer and shall state:
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(i) that the Change of Control Offer is being made pursuant to
such notice and this Section 11.01 and that all Securities, or portions
thereof, tendered will be accepted for payment;
(ii) the Change of Control Purchase Price (including the amount
of accrued and unpaid interest), the Change of Control Purchase Date
and the Change of Control Put Date (as defined below);
(iii) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing cash with
the Paying Agent in accordance with the last paragraph of this clause
(b) or such payment is prevented, any Security, or portion thereof,
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent (which may not for purposes of this Section 11.01,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the earlier of (a) the
third Business Day prior to the Change of Control Purchase Date and (b)
the third Business Day following the expiration of the Change of
Control Offer (such earlier date being the "Change of Control Put
Date");
(vi) that Holders will be entitled to withdraw their election,
in whole or in part, if the Paying Agent (which may not for purposes of
this Section 11.01, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) receives, up
to the close of business on the Change of Control Put Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the Holder is
withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such Change
of Control.
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Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state securities laws, rules and regulations,
including those regulating tender offers, if applicable, and any provisions of
this Indenture which conflict with such laws shall be deemed to be superseded by
the provisions of such laws.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Securities or portions thereof properly tendered and not
properly withdrawn pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent cash sufficient to pay the Change of Control Purchase Price
(including accrued and unpaid interest) for all Securities or portions thereof
so tendered and (iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate listing the Securities or portions thereof being
purchased by the Company. The Paying Agent will on the Change of Control
Purchase Date promptly deliver to Holders of Securities so accepted payment in
an amount equal to the Change of Control Purchase Price for such Securities,
together with any accrued but unpaid interest, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will announce publicly the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
ARTICLE 12
SUBORDINATION
SECTION 12.01. Securities Subordinated to Senior Indebtedness.
The Company and each Holder, by its acceptance of Securities, agree
that (a) the payment of the principal of and interest on the Securities and (b)
any other payment in respect of the Securities, including on account of the
acquisition or redemption of the Securities by the Company (including, without
limitation, pursuant to Section 4.15 or 11.01) is subordinated, to the extent
and in the manner provided in this Article 12, to the prior payment of Senior
Indebtedness of the Company and that these subordination provisions are for the
benefit of the holders of Senior Indebtedness. Notwithstanding anything
contained in this Article 12, no payments to any holders of Senior Indebtedness
shall be made out of investments or proceeds held in the Collateral Account,
which shall be applied solely as provided in Article 10 hereof.
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This Article 12 shall constitute a continuing offer to all Persons who,
in reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are made obligees hereunder and any one or
more of them may enforce such provisions.
SECTION 12.02. No Payment on Securities in Certain Circumstances.
(a) No payment may be made by or on behalf of the Company on account
of the principal of, premium, if any, or interest on the Securities (including
any repurchases of Securities) or on account of any other monetary obligation
for the payment of money due on the Securities, including the redemption
provisions of the Securities, for cash or property (other than Junior Securities
issued in connection with a reorganization pursuant to the Bankruptcy Laws of
any jurisdiction), (i) upon the maturity of any Senior Indebtedness by lapse of
time, acceleration (unless waived) or otherwise, unless and until all principal
of, premium, if any, and interest (and with respect to the Credit Agreement, any
other Obligations) on such Senior Indebtedness are first paid in full in cash or
Cash Equivalents (or, with respect to Senior Indebtedness other than the Credit
Agreement, such payment is duly provided for), or otherwise to the extent such
holders expressly acknowledge satisfaction of amounts due by settlement other
than in cash or Cash Equivalents, or (ii) in the event of default in the payment
of any principal of, premium, if any, or interest on Senior Indebted ness of the
Company when it becomes due and payable, whether at maturity or at a date fixed
for prepayment or by declaration or otherwise (a "Payment De fault"), unless and
until such Payment Default has been cured or waived or otherwise has ceased to
exist.
(b) Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Senior Indebtedness (or a trustee
or agent on behalf of such holders) to declare such Senior Indebtedness to be
due and payable and (ii) written notice of such event of default given to the
Trustee by the holders (or a trustee, agent or other representative of such
holders) of an aggregate of at least $25 million principal amount outstanding of
any Designated Senior Indebtedness (a "Payment Notice"), then, unless and until
such event of default has been cured or waived or otherwise has ceased to exist,
no payment may be made by or on behalf of the Company on account of the
principal of, premium, if any, or interest on the Securities, or to repurchase
any of the Securities, or on account of any other obligation for the payment of
money in respect of the Securities, including the redemption provisions of the
Securities, in any such case (other than payments made with Junior Securities
issued in connection with a reorganization pursuant to the Bankruptcy Laws of
any jurisdiction).
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Notwithstanding the foregoing, unless the Senior Indebtedness in respect of
which such event of default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is delivered as set forth
above (the "Payment Blockage Period") and such declaration has not been
rescinded or waived, at the end of the Payment Blockage Period, the Company
shall be required, unless the provisions described in Section 12.02(a) are then
applicable, to pay all sums not paid to the Holders of the Securities during the
Payment Blockage Period, due to the foregoing prohibitions and to resume all
other payments as and when due on the Securities. Any number of Payment Notices
may be given; provided, however, that (i) not more than one Payment Notice shall
be given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such Payment
Blockage Period (whether or not such event of default relates to the same issue
of Senior Indebtedness) shall be made the basis for the commencement of any
other Payment Blockage Period (it being acknowledged that any subsequent action,
or any breach of any financial covenant for a period commencing after the
expiration of such Payment Blockage Period that, in either case, would give rise
to a new event of default, even though it is a breach pursuant to any provision
under which a prior event of default previously existed, shall constitute a new
event of default for this purpose).
(c) In furtherance of the provisions of Section 12.01, in the event
that, notwithstanding the foregoing provisions of this Section 12.02, any
payment or distribution of assets of the Company (other than Junior Securities
issued in connection with a reorganization pursuant to the Bankruptcy Laws of
any juris diction) shall be received by the Trustee or the Holders at a time
when such payment or distribution is prohibited by the foregoing provisions,
such payment or distribution shall be held in trust for the benefit of the
holders of such Senior Indebtedness, and shall be paid or delivered by the
Trustee or such Holders, as the case may be, to the holders of such Senior
Indebtedness remaining unpaid (or, with respect to Senior Indebtedness other
than the Credit Agreement, unprovided for) or to their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness may have been
issued, ratably according to the aggregate principal amounts remaining unpaid on
account of such Senior Indebtedness held or represented by each, for
application to the payment of all such Senior Indebtedness remaining unpaid, to
the extent necessary to pay (or, with respect to Senior Indebtedness other than
the Credit Agreement to provide for the payment) of all such Senior Indebtedness
in full, or otherwise to the extent holders expressly acknowledge satisfaction
of amounts due after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
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SECTION 12.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
similar proceeding or upon assignment for the benefit of creditors or any
marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company will first be
entitled to receive payment in full in cash or Cash Equivalents (or, with
respect to Senior Indebtedness other than the Credit Agreement to have such
payment duly provided for), or with respect to any holder, otherwise to the
extent such holders expressly acknowledge satisfaction of amounts due in
settlement other than in cash or Cash Equivalents (it being acknowledged that
approval of a plan of reorganization in a bankruptcy proceeding shall not
constitute satisfaction of amounts due in settlement), before the Holders are
entitled to receive any payment on account of the principal of, premium, if any,
and interest on the Securities (other than Junior Securities issued in
connection with a reorganization pursuant to the Bankruptcy Laws of any
jurisdiction);
(b) any payment or distribution of assets of the Company of any kind or
character from any source, whether in cash, property or securities (other than
with Junior Securities issued in connection with a reorganization pursuant to
the Bankruptcy Laws of any jurisdiction) to which the Holders or the Trustee on
behalf of the Holders would be entitled, except for the provisions of this
Article 12, will be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of such Senior
Indebtedness or their representative to the extent necessary to make payment in
full on all such Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character from any source,
whether in cash, property or securities (excluding payments made with Junior
Securities issued in connection with a reorganization pursuant to the Bankruptcy
Laws of any jurisdiction), shall be received by the Trustee or the Holders or
any Paying Agent (or, if the Company is acting as its own Paying Agent, money
for any such payment or distribution shall be segregated or held in trust) on
account of any principal, premium, interest, or other obligation for the payment
of money in respect of the Securities, before all Senior Indebtedness of the
Company is paid in full in cash or Cash Equivalents, such payment or
distribution (subject to the
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provisions of Section 12.07) shall be received and held in trust by the Trustee
or such Holder or Paying Agent for the benefit of the holders of such Senior
Indebtedness, or their respective representatives, ratably according to the
respective amounts of such Senior Indebtedness held or represented by each, to
the extent necessary to make payment as provided herein of all such Senior
Indebted ness remaining unpaid after giving effect to all concurrent payments
and distributions and all provisions therefor to or for the holders of such
Senior Indebtedness, but only to the extent that as to any holder of such Senior
Indebtedness, as promptly as practical following notice from the Trustee to the
holders of such Senior Indebtedness that such prohibited payment has been
received by the Trustee, Holder(s) or Paying Agent (or has been segregated as
provided above), such holder (or a representative therefor) notifies the Trustee
of the amounts then due and owing on such Senior Indebtedness, if any, held by
such holder and only the amounts specified in such notices to the Trustee shall
be paid to the holders of such Senior Indebtedness.
SECTION 12.04. Securityholders to Be Subrogated to Rights of Holders
of Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of all
Senior Indebtedness as provided herein, the Holders of Securities shall be
subrogated to the rights of the holders of such Senior Indebtedness to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness until all amounts owing on the Securities shall be paid in full,
and for the purpose of such subrogation no such payments or distributions to the
holders of such Senior Indebtedness by or on behalf of the Company, or by or on
behalf of the Holders by virtue of this Article 12, which otherwise would have
been made to the Holders shall, as between the Company and the Holders, be
deemed to be payment by the Company or on account of such Senior Indebtedness,
it being understood that the provisions of this Article 12 are and are intended
solely for the purpose of defining the relative rights of the Holders, on the
one hand, and the holders of such Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 12 shall have been
applied, pursuant to the provisions of this Article 12, to the payment of
amounts payable under Senior Indebtedness of the Company, then the Holders shall
be entitled to receive from the holders of such Senior Indebtedness any payments
or distributions received by such holders of Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Indebtedness in full in cash or Cash Equivalents.
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SECTION 12.05. Obligations of the Company Unconditional.
Nothing contained in this Article 12 or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article 12, of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Notwithstanding anything to the contrary in this Article 12 or elsewhere in this
Indenture or in the Securities, upon any distribution of assets of the Company
referred to in this Article 12, the Trustee, subject to the provisions of
Sections 7.01 and 7.02, and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings are pending,
or a certificate of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 12 so long as such court has been
apprised of the provisions of, or the order, decree or certificate makes
reference to, the provisions of this Article 12. Nothing in this Section 12.05
shall apply to the claims of, or payments to, the Trustee under or pursuant to
Section 7.07.
SECTION 12.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.01
and 7.02, shall be entitled in all respects conclusively to assume that no such
fact exists.
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SECTION 12.07. Application by Trustee of Assets Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in
accordance with Article 8 shall be for the sole benefit of the Holders and shall
not be subject to the subordination provisions of this Article 12. Otherwise,
any deposit of assets with the Trustee or the Paying Agent (whether or not in
trust) for the payment of principal of or interest on any Securities shall be
subject to the provisions of Sections 12.01, 12.02, 12.03 and 12.04; provided,
that, if prior to one Business Day preceding the date on which by the terms of
this Indenture any such assets may become distributable for any purpose
(including without limitation, the payment of either principal of or interest on
any Security) the Trustee or such Paying Agent shall not have received with
respect to such assets the written notice provided for in Section 12.06, then
the Trustee or such Paying Agent shall have full power and authority to receive
such assets and to apply the same to the purpose for which they were received,
and shall not be affected by any notice to the contrary which may be received by
it on or after such date.
SECTION 12.08. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article 12 shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
this Indenture or the Holders.
SECTION 12.09. Securityholders Authorize Trustee to Effectuate Subor-
dination of Securities.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article 12 and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the
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benefit of creditors or any other marshalling of assets and liabilities of the
Company), the immediate filing of a claim for the unpaid balance of his
Securities in the form required in said proceedings and cause said claim to be
approved. If the Trustee does not file a proper claim or proof of debt in the
form required in such proceeding prior to 30 days before the expiration of the
time to file such claim or claims, then the holders of the Senior Indebtedness
or their representative are or is hereby authorized to have the right to file
and are or is hereby authorized to file an appropriate claim for and on behalf
of the Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to authorize or consent to or accept or adopt on behalf of any
Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to vote in respect of the claim of any Securityholder in any such
proceeding.
SECTION 12.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article 12 in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
SECTION 12.11. Article 12 Not to Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if
any, or interest or any other monetary obligation for the payment of money on
the Securities by reason of any provision of this Article 12 shall not be
construed as preventing the occurrence of a Default or an Event of Default under
Section 6.01 or in any way prevent the Trustee or the Holders from exercising
any right hereunder, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness in respect of cash, property, securities or other
assets received upon the exercise of any such right.
SECTION 12.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company or
any other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be
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entitled by virtue of this Article 12 or otherwise. Nothing in this Section
12.12 shall affect the obligation of any other such Person to hold such payment
for the benefit of, and to pay such payment over to, the holders of Senior
Indebtedness or their representative.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. TIA Controls. If any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by operation of the TIA, the
imposed duties, upon qualification of this Indenture under the TIA, shall
control.
SECTION 13.02. Notices. Any notices or other communications to the
Company or the Trustee required or permitted hereunder shall be in writing, and
shall be sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
Price Communications Wireless, Inc.
45 Rockefeller Plaza
New York, New York 10020
Attention: Chief Financial Officer
Telecopy: (212) 397-3755
if to the Trustee:
Bank of Montreal Trust Company
77 Water Street
4th Floor
New York, New York 10005
Attention: Corporate Trust Department
Telecopy: (212) 701-7684
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if
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sent by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S)312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, such Person shall furnish to the Trustee:
(1) an Officers' Certificate (in form and
substance reasonably satisfactory to the Trustee)
stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel (in form and substance
reasonably satisfactory to the Trustee) stating that,
in the opinion of such counsel, all such conditions
precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such
certificate or opinion has read such covenant or
condition;
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(2) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(3) a statement that, in the opinion of such
Person, he has made such examination or investigation
as is necessary to enable him to express an informed
opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the
opinion of each such Person, such condition or
covenant has been complied with; provided, however,
that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar. The Trustee
may make reasonable rules for action by or at a meeting of Securityholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 13.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close. If a payment date is
a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 13.08. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT
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MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
SECTION 13.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any of its respective Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse Against Others. No direct or indirect
employee, stockholder, director or officer, as such, past, present or future of
the Company, or any successor entity, shall have any personal liability in
respect of the obligations of the Company under the Securities or this Indenture
by reason of his or its status as such stockholder, employee, director or
officer. Each Securityholder by accepting a Security waives and releases all
such liability. Such waiver and release are part of the consideration for the
issuance of the Securities.
SECTION 13.11. Successors. All agreements of the Company in this
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals. All parties may sign any number
of copies or counterparts of this Indenture. Each signed copy or counterpart
shall be an original, but all of them together shall represent the same
agreement.
SECTION 13.13. Severability. In case any one or more of the provisions
in this Indenture or in the Securities shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the full
extent permitted by law.
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SECTION 13.14. Table of Contents, Headings, Etc. The Table of Contents,
Cross-Reference Table and headings of the Articles and the Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
SECTION 13.15. Qualification of Indenture. The Company shall qualify
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all costs and expenses (including
attorneys' fees for the Company and the Trustee) incurred in connection
therewith, including, but not limited to, costs and expenses of qualification of
the Indenture and the Securities and printing this Indenture and the Securities.
The Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
SECTION 13.16. Registration Rights. Certain Holders of the Securities
are entitled to certain registration rights with respect to such Securities
pursuant to, and subject to the terms of, the Registration Rights Agreement.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
PRICE COMMUNICATIONS WIRELESS,
INC., a Delaware corporation
By:
------------------------------------
Name:
Title:
Attest:
---------------------------------
Secretary
BANK OF MONTREAL TRUST
COMPANY, Trustee
By:
------------------------------------
Name:
Title:
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Exhibit A
[FORM OF SECURITY]
11 3/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
No.
CUSIP No.
Price Communications Wireless, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co., or registered assigns, the principal sum of $___________ Dollars,
on July 15, 2007.
Interest Payment Dates: January 15 and July 15; commencing
January 15, 1998.
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed.
Dated:
PRICE COMMUNICATIONS WIRELESS,
INC., a Delaware corporation
By:
-------------------------------------
Name:
Title:
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
[Name of Trustee]
as Trustee
By:
-------------------------------------
Authorized Signatory
Dated:
A-2
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
11 3/4% Series [A/B] Senior Subordinated Note due 2007
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation, ("DTC"), to the Company
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein./1/
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), OR (B) IT
IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN
THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE
PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY
THEREOF, (B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING
FOR ITS OWN
- -------------------------
/1/ This paragraph should only be added if the Security is issued in
global form.
A-3
<PAGE>
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE,
AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), (E) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATIONS UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER A TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS./2/
1. Interest.
Price Communications Wireless, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Security at the rate and in the manner specified below. Interest
will accrue at 11 3/4% per annum and will be payable semi-annually in cash on
each January 15 and July 15, commencing January 15, 1998, or if any such day is
not a Business Day on the next succeeding Business Day (each an "Interest
Payment Date") to Holders of record of the Securities at the close of business
on the immediately preceding January 1 or July 1, whether or not a Business Day.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months. Interest shall accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance. To
the extent lawful, the Company shall pay interest on overdue principal at the
rate of the then applicable interest rate on the Securities; it shall pay
interest on overdue installments of interest (without regard to any applicable
grace periods) at the same rate to the extent lawful.
- -------------------------
/2/ This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal and interest in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire transfer of Federal
funds, or interest by its check payable in such U.S. Legal Tender. The Company
may deliver any such interest payment to the Paying Agent or the Company may
mail any such interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar
or co-Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of July
10, 1997 (the "Indenture"), between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act, as in
effect on the date of the Indenture. The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and said Act for
a statement of them. The Securities are general unsecured obligations of the
Company limited in aggregate principal amount to $175,000,000.
5. Redemption. (a) The Company will not have the right to redeem
any Securities prior to July 15, 2002. On or after July 15, 2002, the Company
will have the right to redeem all or any part of the Securities in cash at the
redemption prices (expressed as a percentage of the aggregate principal amount
thereof) set forth below, in each case including accrued and unpaid interest, if
any, to the applicable Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date
A-5
<PAGE>
that is on or prior to the Redemption Date) if redeemed during the 12-month
period beginning July 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 105.875%
2003 104.406%
2004 102.938%
2005 101.469%
2006 and thereafter 100.000%
</TABLE>
Notwithstanding the optional redemption provisions described in the
preceding paragraph (a), prior to July 10, 2002, in the event that the Company
or Parent consummates one or more offerings of their Qualified Capital Stock on
or before the third anniversary of the date of the issuance of the Securities,
the Company may at its option, use all or a portion of the cash contributed to
it from such offerings to redeem up to 35% of the original aggregate principal
amount of the Securities at a cash redemption price equal to 111.75% of the
principal amount of the Securities, plus accrued and unpaid interest thereon, if
any, to the redemption date; provided that at least $113,750,000 aggregate
principal amount of Securities remains outstanding thereafter.
In the case of a partial redemption, the Trustee shall select the
Securities or portions thereof for redemption on a pro rata basis or in such
other manner as it deems appropriate and fair. The Securities may be redeemed in
part in multiples of $1,000 only.
The Securities will not have the benefit of a sinking fund.
Any such redemption will comply with Article III of the Indenture.
(b) The Securities must be redeemed (the "Special Redemption") on,
or at any time prior to, December 31, 1997 at a redemption price of 101% of the
principal amount of the Securities, plus accrued interest to the date of the
Special Redemption, if the Merger is not consummated on or before December 31,
1997 or if it appears, in the sole judgment of the Company, that the Merger will
not be consummated by December 31, 1997.
6. Notice of Redemption.
Notice of redemption will be sent by first class mail, at least 30 days
and not more than 60 days prior to a Redemption Date other than the Special
A-6
<PAGE>
Redemption Date, and with respect to the Special Redemption Date, not less than
5 business days prior to the Special Redemption Date, to the Holder of each
Security to be redeemed at such Holder's last address as then shown upon the
registry books of the Registrar.
Any notice which relates to a Security to be redeemed in part only must
state the portion of the principal amount to be redeemed and must state that on
and after the date fixed for redemption, upon surrender of such Security, a new
Security or Securities in a principal amount equal to the unredeemed portion
thereof will be issued. On and after the date fixed for redemption, interest
will cease to accrue on the portions of the Securities called for redemption.
7. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption prior to 15 days after the
notice of redemption.
8. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee and the Paying Agent(s) will pay the money back to the
Company at its written request. After that, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, cash, U.S.
Legal Tender Equivalents, U.S. Government Obligations or a combination thereof,
in such amounts as will be sufficient in the opinion of a nationally recognized
firm of independent public accountants selected by the Trustee, to pay the
principal of, premium, if any, and interest on the Securities to redemption or
maturity and
A-7
<PAGE>
comply with the other provisions of the Indenture relating thereto, the Company
will be discharged from certain provisions of the Indenture and the Securities
(including the financial covenants, but excluding their obligation to pay the
principal of and interest on the Securities). Upon satisfaction of certain
additional conditions set forth in the Indenture, the Company may elect to have
its obligations discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
or make any other change that does not adversely affect the rights of any Holder
of a Security.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the Company
and its Restricted Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, pay dividends or make certain other
restricted payments, enter into certain transactions with Affiliates, incur
Liens, sell assets, merge or consolidate with any other Person or transfer (by
lease, assignment or otherwise) substantially all of the properties and assets
of the Company. The limitations are subject to a number of important
qualifications and exceptions. The Company must periodically report to the
Trustee on compliance with such limitations.
13. Ranking.
Payment of principal, premium, if any, and interest on the Securities
is subordinated, in the manner and to the extent set forth in the Indenture, to
the prior payment in full of all Senior Indebtedness.
14. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to offer to purchase on the Change of Control Payment Date all outstanding
A-8
<PAGE>
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Payment Date.
Holders of Securities will receive a Change of Control Offer from the Company
prior to any related Change of Control Payment Date and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to sell assets. In the event the
proceeds from a permitted Asset Sale exceed certain amounts, as specified in the
Indenture, the Company will be required either to reinvest the proceeds of such
Asset Sale as described in the Indenture or to make an offer to purchase each
Holder's Securities at 100% of the principal amount thereof, plus accrued
interest, if any, to the purchase date.
15. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than as Event of
Default relating to certain events of bankruptcy, insolvency or reorganization),
then in every such case, unless the principal of all of the Securities shall
have already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of Securities then outstanding may declare all the
Securities to be due and payable immediately in the manner and with the effect
provided in the Indenture. The Holders of Securities may not enforce the
Indenture or the Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Securities. Subject to certain limitations, Holders of a majority in aggregate
principal amount of the Securities then outstanding may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
Securities notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
A-9
<PAGE>
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer or employee, as such, past, present
or future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Securities or
the Indenture by reason of his or its status as such stockholder, director,
officer or employee. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Additional Rights of Holders of Transfer Restricted
Securities.
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
A-10
<PAGE>
[FORM OF] ASSIGNMENT
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
- --------------------------------------------------------------------------------
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Date: Signed:
------------------------------ ------------------------------------
- --------------------------------------------------------------------------------
(Sign exactly as name appears on the other side of this Security)
A-11
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.15 or Article 11 of the Indenture, check the appropriate
box:
[_] Section 4.15 [_] Article XI
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.15 or Article XI of the Indenture, as the case
may be, state the principal amount you want to be purchased: $________
Date: Signature:
--------------------------- -----------------------------------
(Sign exactly as your name appears
on the other side of this Security)
A-12
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/3/
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Amount of
decrease in Amount of Principal Amount Signature of
Principal increase in of this Global authorized officer
Amount Principal Amount Security following of Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------------
/3/ This schedule should only be added if the Security is issued in
global form.
A-13
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF SECURITIES/4/
Re: 11 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 OF
PRICE COMMUNICATIONS WIRELESS, INC.
This Certificate relates to $______ principal amount of Securities held in
*_____ book-entry or * ______ definitive form by _____ (the "Transferor").
1. The Transferor:*
[_] (a) has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial interest
in such Global Security (or the portion thereof indicated above); or
[_] (b) has requested the Trustee by written order to exchange or register
the transfer of a Security or Securities.
2. In connection with any such request prior to the date which is two
years after the later of the issuance of this Security (or any predecessor
Security) and the sale hereof by an Affiliate (as defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act")) of the Company
(computed in accordance with paragraph (d) of Rule 144 under the Securities Act)
or by a Transferor that was at the date of such transfer or during the three
months preceding such date of transfer an Affiliate of the Company, and in
respect of each such Security, the Transferor does hereby certify that
Transferor is familiar with the Indenture relating to the above-captioned
Securities and as provided in Section 2.06 of such Indenture, the transfer of
this Security does not require registration under the Securities Act because:*
[_] (a) Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[_] (b) Such Security is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion that
- -------------------------
/4/ The following should be included only for Initial Securities.
*Check applicable box.
A-14
<PAGE>
is aware that the transfer is being made in reliance on Rule 144A (in
satisfaction of Section 2.06(a)(ii)(B), Section 2.06(b)(i) or Section
2.06(d)(i)(B) of the Indenture).
[_] (c) Such Security is being transferred pursuant to an exemption from
registration in accordance with Regulation S under the Securities Act (in
satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the
Indenture).
[_] (d) Such Security is being transferred to an institutional investor
that is an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3) or
(7) under the Securities Act which delivers a certificate in the form of Exhibit
B to the Indenture to the Trustee (in satisfaction of Section 2.06(a)(ii)(D) or
Section 2.06(d)(i)(D) of the Indenture).
[_] (e) Such Security is being transferred in reliance on and in compliance
with another exemption from the registration requirements of the Securities Act.
An Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.06(a)(ii)(E) or Section 2.06(d)(i)(E) of the
Indenture).
-----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------------
Date:
---------------------------
3. Affiliation with the Company [check if applicable]
[_] (a) The undersigned represents and warrants that it is, or at some time
during which it held this Security was, an Affiliate of the
Company.
(b) If 3(a) above is checked and if the undersigned was not an
Affiliate of the Company at all times during which it held this
Security, indicate the periods during which the undersigned was an
Affiliate of the Company:
.
--------------------------------
(c) If 3(a) above is checked and if the Transferee will not pay the
full purchase price for the transfer of this Security on or prior
to the date of transfer indicate when such purchase price will be
paid:
.
--------------------------------
A-15
<PAGE>
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information.
Dated:
-------------------------- ------------------------------------------
NOTICE: To be executed by an officer.
TO BE COMPLETED BY TRANSFEREE IF 2(c) ABOVE IS CHECKED:
The undersigned represents and warrants that it is not a "U.S. Person"
(as defined in Regulation S under the Securities Act of 1933, as amended).
Dated:
-------------------------- ------------------------------------------
NOTICE: To be executed by an officer.
If none of the boxes under Section 2 of this certificate is checked or if any of
the above representations required to be made by the Transferee is not made, the
Registrar shall not be obligated to register this Security in the name of any
person other than the Holder hereof.
THE UNDERSIGNED HEREBY AGREES THAT, UNLESS THE BOX ABOVE UNDER ITEM 3(a) IS
CHECKED, THE UNDERSIGNED SHALL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT NOR
HAS IT BEEN AT ANY TIME DURING WHICH IT HELD THIS SECURITY AN AFFILIATE, AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE
COMPANY.
Dated:
-------------------------- ------------------------------------------
NOTICE: The signature of the Holder to
this assignment must correspond with the
name as written upon the face of this
Security particular, without alteration or
enlargement or any change whatsoever.
A-16
<PAGE>
EXHIBIT B
Bank of Montreal Trust Company
Dear Sirs:
In connection with our proposed purchase of $_______ principal amount
of 11 3/4% Senior Subordinated Notes due 2007 (the "Notes") of Price
Communications Wireless, Inc. (the "Issuer"), we confirm that:
1. We acknowledge that we have been informed that the Notes were
originally issued and sold to purchasers who have received a copy of the
Offering Memorandum dated July 2, 1997, relating to the Notes and understand
that the Notes have not been, and will not be, registered under the Securities
Act of 1933, as amended (the "Securities Act") and may not be sold except as
permitted in the following sentence. We agree, on our own behalf and on behalf
of any accounts for which we are acting as hereinafter stated, that if we should
sell, pledge or otherwise transfer any Notes prior to the second anniversary of
the later of the original issuance of the Notes or the sale thereof by the
Issuer or an affiliate (within the meaning of Rule 144 under the Securities Act
or any successor rule thereto, an "Affiliate") of the Issuer (computed in
accordance with paragraph (d) of Rule 144 under the Securities Act) or if we are
at the proposed date of such transfer or were during the three months preceding
such proposed date of transfer an Affiliate of the Issuer, we will do so in
compliance with any applicable state securities or "Blue Sky" laws and only (A)
to Issuer, (B) in accordance with Rule 144A under the Securities Act (as
indicated by the box checked by the transferor on the form of assignment on the
reverse of the Note), (C) pursuant to any exemption from registration in
accordance with Regulation S under the Securities Act (as indicated by the box
checked by the transferor on the form of assignment on the reverse of the Note),
(D) to an institutional investor that is an "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act which
delivers a certificate in the form hereof to the trustee under the Indenture
dated as of July 10, 1997 between Issuer and Bank of Montreal Trust Company, as
trustee (the "Indenture Trustee"), or (E) pursuant to any other applicable
exemption under the securities laws, and we further agree, in the capacities
stated above, to provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are restricted as
stated herein.
In addition, we understand that, upon any proposed resale of any Note
prior to the second anniversary of the later of the original issuance of such
Note (or any predecessor Note thereof) or the sale of such Note (or any
predecessor Note thereof) by Issuer or an Affiliate of Issuer (computed in
accordance with paragraph (d) of Rule 144 under the Securities Act) or if we are
at the proposed
B-1
<PAGE>
date of such transfer or were during the three months preceding such proposed
date of transfer an Affiliate of the Issuer, we will be required to furnish to
the Indenture Trustee, such certification and other information (including,
without limitation, an opinion of counsel) as the Indenture Trustee, or Issuer
may reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that certificates evidencing Notes
purchased by us will bear a legend to the foregoing effect until the second
anniversary of the later of the original issuance of the Notes (or any
predecessor Notes thereof) or the sale thereof by Issuer or an Affiliate of
Issuer (computed in accordance with paragraph (d) of Rule 144 under the
Securities Act) and for so long as we are or during the preceding three months
have been an Affiliate of the Issuer.
2. We are an institutional investor and an "accredited investor"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
and have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the Notes,
and we and any account for which we are acting are each able to bear the
economic risk of our or its investment and can afford the complete loss of such
investment.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion and for
each of which we are acquiring not less than $250,000 aggregate principal amount
of Notes.
4. We have received such information as we deem necessary in order to
make our investment decision.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Purchaser]
By:
-------------------------------------
Name:
Title:
B-2
<PAGE>
Exhibit 5.1
September 23, 1997
Price Communications Wireless, Inc.
45 Rockefeller Plaza
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel to Price Communications Wireless, Inc.
(the "Company") in connection with the Company's offer (the "Exchange Offer") to
exchange its 11 3/4% Senior Subordinated Exchange Notes due 2007 (the "New
Notes") for any and all of its outstanding 11 3/4% Senior Subordinated Notes due
2007 (the "Old Notes").
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary or advisable for the
purpose of rendering this opinion.
Upon the basis of the foregoing and assuming the due execution and delivery
of the New Notes, we are of the opinion that the New Notes, when executed,
authenticated and delivered in exchange for the Old Notes in accordance with the
Exchange Offer will be valid and binding obligations of the Company enforceable
in accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally and equitable principles.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Exchange Offer. We also consent to the
reference to us under the caption "Legal Matters" in the Prospectus contained in
such Registration Statement.
<PAGE>
Price Communications
Wireless, Inc. 2 September 23, 1997
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by or furnished to any other person without our prior written consent except
that Bank of Montreal Trust Company, as Exchange Agent for the Exchange Offer,
may rely upon this opinion as if it were addressed directly to it.
Very truly yours,
/s/ Davis Polk & Wardwell
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX
MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ ---------------
1992 1993 1994 1995 1996 1996 1997
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense....... $ 8,326 $ 9,027 $12,769 $21,424 $31,524 $16,006 $16,113
Portion of rent expense
representative of
interest.............. 227 384 531 821 1,172 586 682
-------- ------- ------- ------- ------- ------- -------
Total Fixed Charges..... $ 8,553 $ 9,411 $13,300 $22,245 $32,696 $16,592 $16,795
======== ======= ======= ======= ======= ======= =======
Earnings:
Income from operations
before minority
interest share of
income and income
taxes................. $(12,605) $(7,435) $ 2,298 $ 4,682 $ 9,286 $ 3,731 $ 8,333
Fixed charges per
above................. 8,553 9,411 13,300 22,245 32,696 16,592 16,795
-------- ------- ------- ------- ------- ------- -------
Total Earnings.......... $ (4,052) $ 1,976 $15,598 $26,927 $41,982 $20,323 $25,128
======== ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges(1)....... -- -- 1.17 1.21 1.28 1.22 1.50
</TABLE>
- --------
(1) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before extraordinary items and accounting changes, interest
expense, taxes and a portion of rent expense representative of interest by
the sum of interest expense and a portion of rent expense representative
of interest. The ratio of earnings to fixed charges is not meaningful for
periods that result in a deficit. For the years ended December 31, 1992
and 1993 the deficit of earnings to fixed charges was $12,605 and $7,435,
respectively.
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Palmer Wireless, Inc.:
We consent to the inclusion of our report dated January 30, 1997, except for
Note 10 which is as of February 1, 1997, with respect to the consolidated
balance sheets of Palmer Wireless, Inc. and subsidiaries, as of December 31,
1996 and 1995 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the Form S-4 of Price
Communications Wireless, Inc. and to the reference to our firm under the heading
"Experts" in the Prospectus.
KPMG Peat Marwick LLP
Des Moines, Iowa
September 22, 1997
<PAGE>
EXHIBIT 25.1
Conformed Copy
_____________________________________________________________________________
_____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
77 Water Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
77 Water Street, New York, New York 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________________________________
PRICE COMMUNICATIONS WIRELESS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3956941
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
45 Rockefeller Plaza
New York, New York 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
______________________________________
11 3/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
- 2 -
ITEM 1. GENERAL INFORMATION.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York N.Y. 10045
State of New York Banking Department
2 Rector Street, New York, N.Y. 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
-----------------
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust Company to
transact business and exercise corporate trust powers; incorporated
herein by reference as Exhibit "A" filed with Form T-1 Statement,
Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 12th day
of September, 1997.
BANK OF MONTREAL TRUST COMPANY
By: /s/ Amy S. Roberts
-------------------------
Amy S. Roberts
Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Due From Banks $ 594,897
-----------
Investment Securities:
State & Municipal 17,099,800
Other 100
-----------
TOTAL SECURITIES 17,099,900
Loans and Advances
Federal Funds Sold 2,000,000
Overdrafts 17,218
-----------
TOTAL LOANS AND ADVANCES 2,017,218
-----------
Investment in Harris Trust, NY 8,036,150
Premises and Equipment 122,818
Other Assets 2,721,789
--------- -----------
10,880,757
-----------
TOTAL ASSETS $30,592,772
===========
LIABILITIES
Trust Deposits $ 6,408,362
Other Liabilities 659,021
-----------
TOTAL LIABILITIES 7,067,383
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 18,298,208
Equity - Municipal Gain/Loss 4,993
-----------
TOTAL CAPITAL ACCOUNTS 23,525,389
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $30,592,772
===========
</TABLE>
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
June 30, 1997
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declared that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PRICE COMMUNICATIONS WIRELESS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY PRICE COMMUNICATIONS WIRELESS, INC.
EXCHANGE AGENT:
BANK OF MONTREAL TRUST COMPANY
BY MAIL, BY OVERNIGHT
COURIER OR BY HAND:
Bank of Montreal Trust Company
77 Water Street, 4th Floor
Attn: Amy Roberts,
Corporate Trust Department
New York, NY 10005
BY FACSIMILE:
(212) 701-7684
CONFIRM BY TELEPHONE:
(212) 701-7653
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1997 (the
"Prospectus") of Price Communications Wireless, Inc. (the "Company") which,
together with this Letter of Transmittal (the "Letter of Transmittal"),
describes the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of a new series of 11 3/4% Senior Subordinated Exchange Notes
due 2007 (the "New Notes") for each $1,000 in principal amount of outstanding
11 3/4% Senior Subordinated Notes due 2007 (the "Old Notes"). The terms of the
New Notes are identical in all material respects (including principal amount,
interest rate and maturity) to the terms of the Old Notes for which they may
be exchanged pursuant to the Exchange Offer, except that the offering of the
New Notes will have been registered under the Securities Act of 1933, as
amended (the "Securities Act") and, therefore, the New Notes will not bear
legends restricting the transfer thereof.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
<PAGE>
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) AMOUNT PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY NOTES* TENDERED**
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered
the full aggregate principal amount represented by Old Notes. See
Instruction 2.
2
<PAGE>
This Letter of Transmittal is to be used either if certificates for Old
Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" in the Prospectus. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
Old Notes are held of record by DTC who desires to deliver such Old Notes by
book-entry transfer at DTC.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
----------------------------------------------------------------------------
The Depository Trust Company:
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):_______________________________________________
----------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery: _____________________
----------------------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number: ____________________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest
in and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent acts as the
agent of the undersigned in connection with the Exchange Offer) to cause the
Old Notes to be assigned, transferred and exchanged. The undersigned
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained
by DTC.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under "The Exchange Offer." The undersigned recognizes that as a
result of these conditions (which may be waived, in whole or in part, by the
Company), as more particularly set forth in the Prospectus, the Company may
not be required to exchange any of the Old Notes tendered hereby and, in such
event, the Old Notes not exchanged will be returned to the undersigned at the
address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to the Company that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes,
whether or not such person is such Holder, (ii) neither the Holder of Old
Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the
Holder is not a broker-dealer or is a broker-dealer but will not receive new
Notes for its own account in exchange for Old Notes, neither the Holder nor
any such other person is engaged in or intends to participate in a
distribution of the New Notes and (iv) neither the Holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act. If the tendering Holder is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that the Old Notes to be exchanged for
the New Notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes, the undersigned is not deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Old Notes
may be withdrawn at any time prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old Notes
and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
4
<PAGE>
TENDERING HOLDER(S) SIGN HERE
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _____________________, 199
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith or,
if the Old Notes are held of record by DTC, the person in whose name such
Old Notes are registered on the books of DTC. If signature by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative
capacity, please set forth the full title of such person.) See Instruction
3.
Name(s):____________________________________________________________________
----------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):______________________________________________________
Address:____________________________________________________________________
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Taxpayer Identification No.: _______________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
Title: _____________________________________________________________________
Address: ___________________________________________________________________
Name of Firm: ______________________________________________________________
Area Code and Telephone No.: _______________________________________________
Dated: _____________________, 199
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for
all physically delivered Old Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at DTC of Old Notes tendered by book-entry
transfer, as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile thereof, and any other documents required
by this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date or comply with book-entry transfer procedures on
a timely basis may tender their Old Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures." Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution (as defined therein); (ii) on or prior
to the Expiration Date the Exchange Agent must have received from such
Eligible Institution, a letter, telegram or facsimile transmission setting
forth the name and address of the tendering Holder, the names in which such
Old Notes are registered, and, if possible, the certificate numbers of the Old
Notes to be tendered; and (iii) all tendered Old Notes (or a confirmation of
any book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) as well as this Letter of Transmittal and all other documents required by
this Letter of Transmittal must be received by the Exchange Agent within five
New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission, all as provided in the Prospectus
under "The Exchange Offer--Guaranteed Delivery Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted in
all denominations of $1,000 and integral multiples in excess thereof. If less
than the entire principal amount of Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder must fill in the principal
amount tendered in the box entitled "Principal Amount Tendered." A newly
issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the
Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent. Any such notice of withdrawal must specify the person named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of the Old Notes to be withdrawn, the principal amount of
Old Notes delivered for exchange, a statement that such a Holder is
withdrawing its election to have such Old Notes exchanged, and the name of the
registered Holder of such Old Notes, and must be signed by the Holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory
to the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice
of withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawn Old Notes or otherwise
comply with DTC's procedures.
6
<PAGE>
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of certificates
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered Holder, in either case signed exactly as the name or names of the
registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by
an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
Holder of such Old Notes and the certificates for New Notes to be issued in
exchange therefor are to be issued (or any untendered amount of Old Notes are
to be reissued) to the registered Holder; or (ii) for the account of any
Eligible Institution.
4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Notes to it or its order
pursuant to the Exchange Offer. If, however, New Notes are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered Holder of the Old Notes tendered hereby, or if a transfer tax is
imposed for any reason other than the transfer of Old Notes to the Company or
its order pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered Holder or any other person) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exception therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Old Notes
have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated below for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent at the address and telephone number set forth below. In addition, all
questions relating to the Exchange Offer, as well as requests for assistance
or additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Company at 45 Rockefeller Plaza, New York, New York 10020.
Attention: Ashley B. Dixon (212) 757-5600.
7
<PAGE>
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all Letters
of Transmittal or tenders that are not in proper form or the acceptance of
which would, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to the particular Old Notes covered by any Letter of Transmittal or tendered
pursuant to such letter. None of the Company, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Company's interpretation of the terms and conditions of the
Exchange Offer shall be final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and not
otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED
BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
8
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER TO EXCHANGE
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PRICE COMMUNICATIONS WIRELESS, INC.
Registered holders of outstanding 11 3/4% Senior Subordinated Notes due 2007
(the "Old Notes") who wish to tender their Old Notes in exchange for a like
principal amount of 11 3/4% Senior Subordinated Exchange Notes due 2007 (the
"New Notes") and, in each case, whose Old Notes are not immediately available
or who cannot deliver their Old Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to Bank of Montreal Trust
Company (the "Exchange Agent") prior to the Expiration Date, may use this
Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mail to the Exchange Agent. See "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
BANK OF MONTREAL TRUST COMPANY
BY MAIL, BY OVERNIGHT
COURIER OR BY HAND:
Bank of Montreal Trust Company
77 Water Street, 4th Floor
Attn: Amy Roberts,
Corporate Trust Department
New York, NY 10005
BY FACSIMILE:
(212) 701-7684
CONFIRM BY TELEPHONE:
(212) 701-7653
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid
delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office, branch, agency or
correspondent in the United States, hereby guarantees to deliver to the
Exchange Agent at its address set forth above, the certificates representing
the Old Notes, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
and any other documents required by the Letter of Transmittal within five New
York Stock Exchange, Inc. trading days after the date of execution of this
Notice of Guaranteed Delivery.
Name of Firm: ____________________________ _________________________________
(AUTHORIZED SIGNATURE)
Address: _________________________________ Title: __________________________
__________________________________________ Name: ___________________________
(ZIP CODE) (PLEASE TYPE OR PRINT)
Area Code and Telephone Number: __________ Date: ___________________________
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER OF PARTICIPANT FROM OWNER
OF
PRICE COMMUNICATIONS WIRELESS, INC.
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
TO REGISTERED HOLDER AND/OR PARTICIPANT OF THE BOOK-ENTRY TRANSFER FACILITY:
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of Price Communications Wireless, Inc., a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meaning as ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$ of the 11 3/4% Senior Subordinated Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Old Notes held by you for the account of
the undersigned (insert principal amount of Old Notes to be tendered,
if any):
$ of the 11 3/4% Senior Subordinated Notes due 2007.
[_] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make,
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the undersigned, (ii) neither the
undersigned nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act of 1933, as amended (the "Securities Act"). If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE>
SIGN HERE
Name of beneficial owner(s): __________________________________
Signature(s): _________________________________________________
Name(s) (please print): _______________________________________
Address: ______________________________________________________
Telephone Number: _____________________________________________
Taxpayer Identification or Social Security Number: ____________
Date: _________________________________________________________
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<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PRICE COMMUNICATIONS WIRELESS, INC.
To Our Clients:
We are enclosing herewith a Prospectus, dated , 1997, of Price
Communications Wireless, Inc. (the "Company"), a Delaware corporation, and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Company to exchange its 11 3/4% Senior
Subordinated Exchange Notes due 2007 (the "New Notes"), pursuant to an
offering registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
11 3/4% Senior Subordinated Notes due 2007 (the "Old Notes") upon the terms
and subject to the conditions set forth in the Exchange Offer.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Old Notes held by us for your account. A tender of such Old Notes
can be made only by us as the record holder and/or participant in the book-
entry transfer facility and pursuant to your instructions. The Letter of
Transmittal is furnished to you for your information only and cannot be used
by you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired in the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such New Notes, whether or not such person is such holder, (ii) neither the
holder of the Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the New Notes and (iv) neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act. If the tendering holder is a broker-dealer
(whether or not it is also an "affiliate") that will receive New Notes for its
own account in exchange for Old Notes, we will represent on behalf of such
broker-dealer that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities, and acknowledge on behalf of such broker-dealer that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, such broker-
dealer is not deemed to admit that it is an "underwriter" within the meaning
of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.5
OFFER TO EXCHANGE
11 3/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PRICE COMMUNICATIONS WIRELESS, INC.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by
Price Communications Wireless, Inc. (the "Company"), a Delaware corporation,
to exchange its 11 3/4% Senior Subordinated Exchange Notes due 2007 (the "New
Notes"), pursuant to an offering registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its issued
and outstanding 11 3/4% Senior Subordinated Notes due 2007 (the "Old Notes")
upon the terms and subject to the conditions set forth in the Company's
Prospectus, dated , 1997, and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's instruction
with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS
EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired in the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such New Notes, whether or not such person is such holder, (ii) neither the
holder of the Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the New Notes and (iv) neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act. If the tendering holder is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, you
will represent on behalf of such broker-dealer that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, such broker-dealer is not deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner contains an authorization by the beneficial owners of
the Old Notes for you to make the foregoing representations.
<PAGE>
The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Offer. The Company will
pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 4 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
Bank of Montreal Trust Company
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PRICE COMMUNICATIONS WIRELESS, INC. OR BANK OF MONTREAL TRUST
COMPANY OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR
BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED
HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
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